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Ethiopian Airlines crash: Insurance claims hit $60m as Air Peace awaits probe

Insurance claims emanating from the crashed Boeing 737 Max jet operated by Ethiopian Airlines, has been estimated at $50 million to $60 million.

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Insurance claims emanating from the crashed Boeing 737 Max jet operated by Ethiopian Airlines, has been estimated at between $50 million to $60 million. The crash killed all 157 passengers on board, including two Nigerians.

According to Reuters, global insurance brokerage and risk management firm, Willis Towers Watson, is the lead insurer for Ethiopian Airline. The leading insurance provider — Chubb will serve as the lead underwriter.

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Initial compensations for the families of the 157 victims are expected to be within the range of $25 million. However, the amount is expected to increase as litigation mount against both Ethiopian Airlines and Boeing.

Note that while the initial insurance payments is expected to come from Ethiopian Airlines’ insurers, they could try to recoup their money from Boeing’s insurers. But this is dependent on their ability to prove that the aircraft was faulty.

In the meantime, the insured value of the downed plane alone is pegged at $50 million, industry sources said.

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A catastrophic crash: As Nairametrics reported, the Ethiopian Airlines flight 302 crashed early Sunday morning on its way to Kenya, from Ethiopia. Everybody onboard the flight died.

Prior to the crash, the pilot was said to have reported some technical difficulties minutes after takeoff, for which he was cleared to return to the airport. Unfortunately, the plane never made it back to the Bole International Airport.

Nigerian died on that flight: Nigerians involved in the crash were popular Nigerian-born Canadian professor and writer, Pius Adesanmi, and Ambassador Abiodun Bashua, a former Joint Special Representative for the African Union-United Nations Hybrid Operation in Darfur, Sudan.

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In the meantime, Air Peace is not cancelling its Boeing 737-MAX 800 order

Despite ban by various countries on the Boeing 737-MAX 800 jets, Nigeria’s airline operator, Air Peace has stated that it has no intention to cancel the order the it made earlier last year.

Air Peace and the American aircraft manufacturer, had on September 13, 2018 signed agreement for the delivery of 10 brand new B737 MAX 800 aircraft. And following safety concerns originating from the recent crash, a spokesman for the company, Mr Chris Iwarah, said it is rather premature to start considering cancelling the orders.

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“At this moment, it is premature to begin to talk about things and conclusions that have not been put in the public domain.

“Investigations into the crashes involving B737Max 800 are ongoing. So, it will not be fair at this time to begin to make definite comments on those issues.

“We are still in the domain of investigation. But, we want to assure the public that we are following the development very closely.”

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Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: fakoyejo.olalekan@nairametrics.com.

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Business News

IMF advises banks to suspend dividend payment

However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.

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IMF discloses immediate priority , Reduce funding oil subsidy - IMF to Nigeria , IMF: 40% of African countries can't pay back their debts , Nigeria among countries that pushed Global debt to $188 trillion - IMF , Coronavirus: World Bank, IMF to support Nigeria and other member countries affected, IMF, World Bank to hold meetings via conference call over Coronavirus epidemic, IMF advises banks to suspend dividend payment

In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.

According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.

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IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.

READ MORE: State Governments: Another cycle of non-payment of salaries to begin soon

In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).

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However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.

Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.

(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)

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That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.

IMF advises banks to suspend dividend payment

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CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,

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NIGERIA.

 

 

 

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Economy & Politics

CBN reduces MPR to 12.50%, holds other metrics

Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.

Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja.  Meanwhile, other parameters such as the Cash Reserve Ratio  (CRR) remained at 27.5%, Liquidity ratio at 30%.

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READ ALSO: Bankers decry rise in public debt, weak economy

Highlights of the Committee’s decision

  • MPC cuts MPR by 100 basis points to 12.50%
  • CRR stood at 27.5%
  • The Liquidity Ratio was also kept at 30%

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READ ALSO: Nigeria’s total debt to hit N33 trillion – Senate

According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate  was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.

He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.

READ MORE: AfDB’s Akinwumi Adesina hits back, denies allegations against him

On reopening of the economy, Emefiele emphasised the need for Government to work towards a gradual reopening in line with recommendations of the Presidential Task Force (PTF) and advice from medical experts, insisting that efforts must be directed at saving not only lives but also livelihoods. He said,

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“This is to enable the resumption of economic activities necessary to stimulate growth, accelerate the pace of recovery and restore livelihoods, particularly the vulnerable in our society.

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“With respect to output, the Committee urged the Federal Government to continue exploring options of partnership with the private sector to fund investment in infrastructure. This would aid employment generation, support production and boost output growth.”

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Economy & Politics

Buhari seeks approval from green chamber to borrow fresh $5.5billion

FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

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President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.

This request was disclosed via the official twitter handle of the House of Representatives.

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The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.

READ ALSO: 4 key sectors CBN plans to pump money into

In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

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Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.

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READ MORE: Africa’s Post-Covid: Elumelu Moderates as Presidents of Senegal, Liberia, US Senator Coons, others Convene at UBA Africa Day Conversations 2020

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Details shortly…

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