The most important presidential election in Africa in 2019 is finally about to happen. And as expected, many people are agitated, especially members of the two main political parties in the country who are making last minute efforts to ensure that their flag bearers win.
A winner will, indeed, emerge after Saturday’s election. And whoever that might be, their job is already cut out for them. They will be expected revive and position the economy of Africa’s most populous country which, for the most part, has leap-frogged over the past four years. It is needless to say that the incumbent President, Muhammadu Buhari, has been unable to accomplish this between 2015 and now. Does he need another four years to try again?
A failed promise?
Recall that prior to the 2015 presidential election that defeated People Democratic Party’s Goodluck Jonathan, the then All Progressive Congress’ flag bearer, Muhammadu Buhari, made a lot of promises. One of these promises was about revamping the economy and specifically making sure that it grew at the rate of 10% per annum. This promise was never fulfiled, not even once in the course of four years.
Instead, the country’s Gross Domestic Product contracted for the most part, with rising inflation rates, and the consequent hunger and poverty gripping much of the population. According to recent statistics from the Nigerian Bureau of Statistics (NBS), unemployment rate in the country also kept rising; increasing from 18.8% in Q3 2017 to 23.1% in the same period last year.
And as always, the country’s young population was mostly affected by this.
Meanwhile, the Government was ‘fighting corruption’
The Muhammadu Buhari-led administration focused a lot on its fight against extreme corruption in the Nigerian system. And while this is not a bad thing to do (seeing as corruption is basically the bane of the society), some have argued that the Presidency put in a lot of effort into this whilst accomplishing very little result. According to a Professor of Nigerian Politics at the Department of Political Science, University of Ibadan, who chose not to be named:
“This Government wasted four whole years deceiving Nigerians in the name of fighting corruption. Tell me one positive outcome of his so called corruption fights. We all know that he wasn’t fighting any corruption. Instead, he used that slogan as a veil for his political vendetta, targeting political opponents while leaving those in his party untouched. Oh yes, he is harbouring some of the most corrupt politicians in his party, yet determined to allow rival politicians like former National Security Adviser, Col. Sambo Dasuki, to perish in detention.”
To be fair, the Government initiated favourable economic policies
The Economic Recovery Growth Plan, ERGP, can arguably be said to be President Buhari’s most prominent economic policy. This Federal Government policy was conceived as an all-inclusive development initiative, which was supposed to help restore economic growth in Nigeria by investing in the citizens and also building a globally competitive economy.
Expectedly, this policy had a lot of components which ranged from stabilising the macroeconomic environment, to achieving food security, ensuring sufficiency in electricity supply, driving industrialisation, diversifying the economy, and ensuring overall development.
The introduction of the Voluntary Asset & Income Declaration Scheme, VAIDS, is one component of the ERGP. And the successful implementation of the scheme, to a large extent, helped to revive the effectiveness of the country’s tax collection system. As a matter of fact, the Federal Inland Revenue Service, FIRS, said in December last year that it had generated as much as N5.3 trillion from tax collection. This is an all-time-high record, by the way.
The relative success recorded with VAIDS has helped the Government to maintain its public debt level at a relative low of 21% of the GDP. Little wonder the CIA World Factbook classifies the country as having one of the lowest public debt levels in the world.
In the same vein, the Government has tried to shift away from borrowing by issuing billions of dollars’ worth of Eurobonds in the past few years. However, to sustain this trend, the Government will have to actually perform the all-important task of diversifying the economy because this is the only way it can improve corporate performance and unlock private credit, just like the International Monetary Fund, IMF, had advised in the past. However, doing this depends entirely on whether or not Buhari wins this all-important election.
But not everyone is a fan of the ERGP
Still on the Economic Recovery Growth Plan, macroeconomic indicators have fluctuated between Q2 2017 when the initiative was launched, and December 2018. For instance, latest GDP figures published earlier this week by NBS shows that the country’s Gross Domestic Product increased at the rate of 1.93% year on year.
While this is good news for the President Buhari administration, the truth is that it hasn’t always been this nice. In 2017, the GDP rate stood at 0.8%, and in 2016, it was -1.6%. When compared, therefore, with the 2015 figure which stood at 2.7%, it becomes obvious that the latest GDP figure isn’t something to dance about, after all.
Moreover, some Nigerians do not exactly feel the impact of the so called increase in GDP. Take for instance, a small business owner at Computer Village, Lagos, who identified himself as Mr Ebenezer, was asked if he thinks the latest GDP figure is indicative of good things to come. He said no, because he never gets to feel the impact when the economy is supposedly doing well, only when it is not.
“From 2015 till around early 2017, most of us were affected by the worst economic recession this country ever experienced in years. Again, that affected us all, and the CBN did not even help the situation with its controversial FX policies. So, how come after we felt the recession and the inflation, we are not feeling the rise in GDP? I mean, this is common-sensical, right? We see people suffering in abject poverty. We see unemployed graduates and we experience epileptic power supply. And here they are, presenting statistics to show that things are better when they are not. Who are they deceiving?
“We need to vote out this Government by all means and allow someone else the chance to try and restore the economy. Apparently, the APC has tried at this but failed. Now, we need someone who can achieve tangible results instead of dishing out unsubstantiated statistics.”
The main opponent, Atiku Abubakar, who could defeat the incumbent, is no angel
Today, many Nigerians are very critical of Nigeria’s current Vice President, Professor Yemi Osinbajo, who has basically been the poster child for some of the Government’s economic policies. After all, it has been him who has gone all over the country talking about the millions of jobs the Government supposedly created over the past four years. Moreover, it is the Vice President who has been busy launching the Government’s TraderMoni initiative, which Transparency International recently branded a vote-buying scheme.
But while we criticise Professor Osinbajo, let us not forget so quickly that a former Vice President with a far worse damning political past, is now at the forefront of the race to head the most important position in the country. You guessed that right, we are now talking about Alhaji Atiku Abubakar, the presidential flag bearer of the People’s Democratic Party, PDP. Many see him as a strong contender, who could potentially defeat the incumbent president. And they are right because, not only does Alhaji Abubakar have the political experience and clout, he is also preaching some economic messages which some voters seem to like. But is he really the man that can lead Nigeria to Eldorado?
Agreed, former Vice President, Atiku Abubakar is an astute businessman, whose many business concerns have provided jobs for many Nigerians. But he is also a man with a sketchy past, whose alleged transgressions were supposedly so much to the extent his former boss, President Olusegun Obasanjo, “disowned” him. Ever since 2007 when he left office as Vice President, Mr Abubakar has been trailed by many corruption scandals; none of which he has been convicted of anyway.
Does he plan to continue the job he left uncompleted as VP?
One of Alhaji Abubakar’s most important assignment as Nigeria’s Vice President was to supervise the National Council on Privatisation, which sold off many under-performing and ill-managed state-owned companies. While the privatisation drew widespread criticism back in the early 2000s when it was happening, many praised the process. And now, Alhaji Abubakar has promised that one of his economic policies as Nigeria’s president would be to, among other things, reform public institutions. The man specifically has his eyes set on the Nigerian National Petroleum Commission, NNPC, which he accused of operating as a mafia, at the expense of the Nigerian public.
In the meantime, while Alhaji Atiku’s proposed economic agenda for Nigeria enjoys support from some people, it has also been criticised by some. These proposed policies include monetary and fiscal reforms such as floating the naira, positioning the manufacturing sector, solving the country’s epileptic power problem, actualising public-private partnership for the country’s infrastructure, etc. All these are election promises which may never even get fulfilled if he wins. But then again, can he actually win?
In conclusion, Saturday is Election Day
From all indications, Saturday’s presidential polls is definitely going to be a keenly contested one. And whoever becomes victorious at the would be expected to accomplish quite a lot; doing everything possible to position the Nigerian economy for success. Indeed, the winner will be expected to diversify the country’s economy, drastically reduce the unemployment rate through the creation of actual jobs of various kinds, and also, ensure a reduction of the country’s inflation rate, etc.
The inability to accomplish these and more would amount to failure. And Nigerians do not deserve to experience more of such. Therefore, as the candidates and their political parties ready themselves for Saturday, they should also bear in mind that the task ahead is a serious one. If they are not prepared to deliver, it is never too late to stand down.
Strong performance from Stanbic IBTC, despite weak retail banking position
Will Stanbic IBTC be able to generate profit from its personal banking division by full year?
Stanbic IBTC made a profit after tax of N45.2billion, growing its profit by 24.7% when compared with this period last year.
The feat is remarkable; given that a majority of financial institutions responded as expected to the economic downturn triggered by inflationary pressures, oil price instability, and lack of notable business activities, necessitated by the corona-virus pandemic that has characterised the 2020 business calendar year.
These other organizations reflected positions worse off than their escapades in 2019. In cases where improvements in bottom-line were seen, it was only marginal.
Stanbic IBTC was not exempted from these economic trials, their immensely diversified business portfolio boosted their numbers on multiple fronts. Robust presence in Asset Management paid off, as commissions and fees represented a massive 62% of general fees and commission income. It’s Corporate and Investment division continues to produce astoundingly, contributing the highest and growing profit after tax of 49.2%.
This focused and efficiently monitored diversification, is turning Stanbic IBTC into world-beaters, reflecting in the expansion of its gross earnings by 7.8%, from N117.4billion in HY’2019 to N126.6billion so far this year.
This position could have appeared even better; had STANBIC been able to demonstrate in its personal and business banking segment, the same excellence, noticeable in its other business segments (Wealth, Corporate and Investment).
It’s Personal banking (generally regarded as Retail banking), encompasses the provision of banking and financial services to individual customers and SME’s (Small and Medium scale enterprises), mortgage lending, leases, card products, transactional and lending activities such as telephone banking, ATM’s, etc. The segment suffered this year, closing with a loss of N3.2billion, despite being responsible for over 58.4% of general staff costs. This poor position was sponsored by a reduction in income levels, especially non-interest income from fees and commission.
Unsurprisingly, given CBN’s policy at the start of the year to implement a much-reduced transfer fee rate, an increase in Non-performing loans is another causal factor for its loss this half-year. STANBIC cannot afford to bask in the euphoria of the massive successes of its Wealth and Corporate segment, at the expense of Retail banking.
Retail banking is fundamental to any bank looking to be a force, or preserve its going-concern status in this critically competitive economic environment. It has been the subject of immense research in the last decade, with many banks devising strategies to acquire a large chunk of the market share in this business segment. The banking landscape is evolving amidst growing competition, such that a bank that generally does well in its retail banking segment, is perceived as strong by the public. This has an underrated capacity to effortlessly attract more customers. Banks need to revisit the drawing board and re-embrace their sacred purpose of serving the basic and pure needs of their individual customers.
Michael Lafferty, Chairman of the Lafferty Group, whilst describing Retail banking said, “Retail banking is the foundation on which global banks are built,” It is a vast retail and consumer banking market, pointing out that the world’s biggest banks built their financial empire from the mass market.
Stanbic IBTC must be conscious in its quest to provide universal banking and find a balance in product and service offerings across its business segment.
A summary of the performance parameters in its financial statement, shows growth in gross earnings, from N117.4billion to N126.6billion, and improvement in earnings per share from 342kobo to 419kobo.
Attention now shifts to the impact of the bank’s new super app, supposedly a one-stop-shop for its diverse offerings, including banking, investing, pensions, trading, and insurance, and how it affects the bottom line in subsequent quarters.
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Lastly, will Stanbic IBTC be able to generate profit from its personal banking division by full year? We await their H2’2020 results.
Is Zenith Bank thriving on the strength of sound financial indices?
Zenith Bank posts N103.8bn profit in half-year financial result.
Sound financial indices have made Zenith Bank one of the largest banks in the Nigerian banking Industry. It was recognized as the Most Valuable Banking Brand in Nigeria 2019, in the Global Banker magazine Top 500 Banking brands; and Best Commercial Bank in Nigeria 2019, by the World Finance.
Zenith Bank has successfully bolstered this narrative even further with the release of its Half Year 2020 Financial Report, where it closed with a profit of N103.8 billion.
Growing profit position in these perilous times, speaks remarkably of the suppleness and elasticity of any establishment. A lull in economic activity caused by inflationary pressures, precariousness of the market, and the coronavirus pandemic has forced most Deposit Money Banks (DMBs) to cave in, and reveal achievements worse off than their 2019 results y/y – but not Zenith Bank Plc. The institution has showcased beyond reasonable doubt, that the apparent limitations are incapable of distorting its active growth pattern.
Zenith Bank closed H1 2020, 16.8% better off than it did in 2019 y/y, in terms of profit after tax. Although this massive leap, hugely resulting from tax paid as profit before tax, noted just a 2.2% growth. Further analysis of its HY’2020 results, demonstrates more efficiency, a focused cost of fund optimization, and an aggressiveness in generating income across its business heads and segments. This strategy had begun since 2018, and was shared by the bank when it disclosed planned implementation of an improved core banking system, hoping it would ultimately enhance efficiency while reducing costs.
Zenith Bank has thrived on the strength of its sound business model, corporate governance, conservative risk management, and strategic corporate social investment. The bank has been very forceful in the market, improving massively across all of its income generating segments, despite the plausible and obvious hindrances. This is a testament to its superiority, and sponsors its claim for supremacy.
The bank made N22billion from foreign exchange revaluation gains and despite evidence to the contrary, it endeavored in operating expenditure (OPEX). OPEX may have grown by 7.7%, but disclosures and note to the accounts shows that in virtually every expense head, costs dropped. The 7.7% was triggered majorly by Information Technology related costs, fuel and maintenance, and an increase in the compulsory banking cost fund, set up for the Asset Management Company of Nigeria (AMCON) by the CBN.
Now, like every hero susceptible to their hubris, Zenith has its own problems, which questions its position at the top. Yes, the bank may have an amazing and constantly improving interest expense to interest income ratio, but it does not possess the finest result in this regard as of yet. HY 2019 interest expense took as much as 33.6% of its income, while HY 2020 dropped to 27.4%. This is good, but still considerably high, if we carry out a peer-to-peer analysis with Guarantee Trust Bank Plc (masters of low-interest expenses), whose ratio stands at 16% for HY 2020.
However, Zenith has sustained the momentum of positioning itself as the crème de la crème in the Nigerian Banking Industry for quite some time. The bank’s pattern of growth and performance, strongly indicates its capabilities to manage its interest expense in subsequent quarters. It will be interesting to see how this pans out by year end.
In summary, despite economic difficulties this year, with most bank’s bottom-line at a worse position than the corresponding period last year, Zenith posted improved profit yet again. Could this be enough to portray supremacy?
UBA Plc H1’2020 results, a true reflection of its rightsizing decision?
UBA’s H1 2020 result is yet another demonstration of the resilience of its business model.
The upward review in benefits of some employees and directors this year, coupled with the rising operational costs, constitutes the hot topics from the 2020 semi-annual results released by UBA Plc.
Widely regarded as the banking sector’s largest employer of labour in Nigeria, the bank in December 2019, embarked on a ‘rightsizing’ exercise, which partly resulted in new hires, as well as promotions, improved remunerations, and benefits for existing employees.
The Group Head, Media and External Relations, UBA Plc, Nasir Ramon commenting on this said, “over 5000 staff of UBA Plc, started the new year with a lot of cheer, as the bank promoted to new grades, coupled with salary upgrades. Beneficiaries of this exercise will receive up to 170% increase in their salaries and benefits, whilst a good number have been moved to higher grade levels.”
Directors saw their emoluments amplify by 177.7% (Fees and Sitting allowances) as demonstrated in the financial statements of the bank. Rising to N50million in June 2020, from N18million in 2019 y/y.
Now, Deposit Money Banks (DMB’s) might be adjudged to be honorable in all of their objectives, but the truth is they are neither self-sacrificing nor are they expected to be. DMB’s are established for profit, and would incessantly prioritize business good sense over social empathy, for the sake of their owners. The import of this is, UBA Plc expects its colossal investments in employees and directors to overwhelmingly reflect in its bottom-line.
Half-year 2020 results is clearly not in sync with this philosophy, as it reflects a weakened position compared to the corresponding period last year, despite the investments in human capital. Profit before tax dropped by 18.7%, from N70.3billion recorded in HY’2019 to N57.1billion in the current period. Profit after tax waned as well by 21.7% to N44.4billion from N56.7billion in HY’2019.
Interestingly enough, the top-line fared pretty well. Interest income and fee income showed improvements, albeit marginally by 0.3% and 6.7% respectively. This makes it illogical to attribute the entirety of the decline in profit to the recent austerity measures put in place by the CBN, reducing funds transfer fees and card maintenance charges.
The Coronavirus pandemic played a big role too, by widely stunting the economy in the second quarter of 2020, and negatively impacting profit. But even these do not provide substantial and sufficient convictions as to why the Tier-one bank did not hit the profit-bar it set for itself, from its truly emphatic 2019 financial year. Does this mean that UBA Plc got the decision wrong at the start of the year?
Six months seem too short a period to immediately class management’s decision to jack up the benefits and emoluments of its internal customers as a failed one. Although, no one anticipated the travails of COVID-19 and its resulting consequences, investments in human capital is widely proven to yield tremendous growth in the long haul. Besides the fact that it has given UBA Plc a solid reputation in the market place, it also makes the company very attractive to the very best of industry talents. Furthermore, employee engagements of this nature, foster brand loyalty which ultimately trickles down to how passionately these personnel undertake their tasks and deliverables. The true bearing of this investment is expected to reflect in due course, in subsequent quarters.
Commenting on the result, UBA’s Group Managing Director/Chief Executive Officer, Mr Kennedy Uzoka said, “Our H1 2020 results is yet another demonstration of the resilience of our business model in an extremely uncertain and tough operating environment. We recorded commendable growth in our underlying business in terms of customer acquisition, transaction volumes, and balance sheet whilst inflation, depressed yield environment and exchange rate volatility impacted our net earnings as anticipated.”
In today’s increasingly aggressive marketplace, where consistently generating revenue, is paramount to preserving the longevity and going-concern status of any establishments, costs must also be accorded as much attention and significance. Tightening and managing costs with the aim to improve and generate profit is genius strategy especially in today’s banking industry. The banking industry is under threat from ruthless competitions. Multifarious streams that had hitherto been available for generating income for DMB’s are being severely hindered by the ‘austere’ policies (from the perspective of commercial banks) from the apex bank, making effective cost management a survival mechanism.
Explore the Nairametrics Research Website for Economic and Financial Data
Employee benefits rose by 20% from N37.2billion in HY’2019 to N44.6billion in HY’2020, while Directors’ emoluments (Fees and Sitting Allowance) as earlier stated, surged by 177% from N18million in 2019 to N50million in 2020 y/y. The total operating expenses increased 22.6% in 2020. UBA Plc, unavoidably expended N22.4billion on Banking Sector Resolution cost trust fund, in compliance with the CBN’s requirement to contribute to the cause of the Asset Management Company of Nigeria (AMCON). Security and other payments for core services experienced increase as well compared to the preceding year.
Avoidable expenses like Penalties and Premises Maintenance Charge, should be extensively reviewed and extinguished wherever possible, to improve bottom line. UBA plc has forked out N565million in penalties so far in 2020, representing 6177.7% increase from just N9million in 2019 y/y. This is a prime example of the operational brick walls, UBA Plc must properly address to improve its fortunes in subsequent quarters.