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Electronic banking is profitable for Nigerian banks as they generate N124bn in 2018

Reports have shown that Nigerian banks generated revenue of about N124.5 billion from electronic transactions in 2018, increasing by 43% year-on-year.

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Nigerian Banks

Reports have shown that Nigerian banks generated a total revenue of about N124.5 billion from electronic transactions in FY 2018.

A breakdown of the audited 2018 yearly reports from 11 banks indicates that revenue from e-transactions in the banks increased by 43 per cent year-on-year, from the N86.72 billion acquired by the banks in 2017.

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The names of the various banks and the revenue generated – Below are the top 5 banks that acquired high income from e-transaction in 2018.

  1. First Bank Of Nigeria Limited – First Bank tops the list with the highest income of N34.03 billion in 2018, increasing by 36 per cent from e-transactions in 2017.
  2. United Bank for Africa Plc – This is followed by UBA, with revenue of about N27.92 billion in 2018, an increase of 33 per cent from N20.92 billion in the preceeding year.
  3. Zenith Bank Plc – Zenith bank comes third place with revenue of N20.42 billion, rising by 44 percent from N14.15 billion generated in 2017.
  4. Guaranty Trust Bank Plc – GTB is ranked as the fourth with a jump in its revenue from N7.48 billion in 2017 to N9.59 billion in 2018, representing a 28 per cent increase.
  5. Access Bank Plc – Access Bank comes fifth place with an income of N8.38 billion in 2018, increasing by 45 percent from N5.79 billion in 2017.
  6. First City Monument Bank: This bank earned N8.32 billion from electronic payment in 2018, increasing 45 percent from N5.75 billion in 2017.
  7. Sterling Bank Plc: Earnings from electronic payment stood at  N4.85 billion in FY 2018.
  8. Union Bank Plc: N4.73 billion.
  9. Fidelity Bank Plc: N2.85 billion.
  10. Wema Bank Plc: N2.84 billion
  11. Jaiz Bank Plc: N323 million.

Recall that Nairametrics earlier analysed how Zenith Bank Plc and Guaranty Trust Bank Plc alone, raked in over N30 billion from electronic business fees in full year 2018.

How banks generate income from electronic transaction – The revenue is spawned through fees and commissions that are gotten from transactions that their customers do via Automated Teller Machines (ATMs), USSD, internet banking, Point Of Sales (POS) payments and agency banking.

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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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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.

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).

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.

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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)

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.

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IMF advises banks to suspend dividend payment

 

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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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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%

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.

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Economy & Politics

Just in: 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.

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.

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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Details shortly…

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