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Stockbrokers won’t agree whether CBN’s SDF policy will make banks great again

FSDH, CSL Stockbrokers, and Moody’s argue the Central Bank of Nigeria’s (CBN) new Standing Deposit Facility (SDF) policy.

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CBN warn banks against enforcing insurance covers on borrowers

The new policy of Central Bank of Nigeria (CBN) on Standing Deposit Facility (SDF), has drawn arguments from stakeholders of the country’s financial and banking sectors.

While some stakeholders showed support for the new measures put in place, others argued that the Central Bank should have prioritised addressing the reasons behind lenders’ reluctance to lend to the country’s economy.

[READ MORE: Our view on CBN’s revision of SDF guidelines by CSL Capitals]

Arguments: Reacting to the new measure, the Head of Research and Strategy at the FSDH, Ayodele Akinwunmi, made known that the policy would make the apex bank have access to more funds from the banking system at no cost than before.

CBN's SDF Policy, FSDH

Head of Research and Strategy at the FSDH, Ayodele Akinwunmi

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According to Akinwunmi, the new policy would reduce the interest income of banks going forward. He also said it would force banks to trade more with one another in the interbank market than before, adding that it might also reduce the cost of managing system liquidity for the CBN.

“In addition, interbank interest rates may drop further as a result of increased system liquidity. This is part of the efforts of the CBN to increase banks’ credit to the real sector of the economy in order to stimulate the growth of the economy.”

In what seems to be similar to FSDH’s stance, analysts at CSL Stockbrokers Limited maintained that the new policy fails to address the fundamental issues behind banks’ reluctance to lend and would only result in banks looking for innovative ways to get around the rules.

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According to the CSL Stockbrokers, the low-risk appetite among banks for lending to the real sector could be attributed to the high risks in the operating environment which hinders the survival of SMEs and the profitability of businesses in general.

Expressing confidence in the new policy, a banking analyst at Moody’s, Peter Mushangwe, said the latest measure signalled the Central Bank’s intention to stimulate lending to the real economy.

According to Mushangwe, in Moody’s view, the new directive is unlikely to force Nigerian banks to grow their lending aggressively.

(READ ALSO: Emefiele reacts to allegations that CBN has multiple exchange rates)

“Assuming banks would lend out amounts above the new N2 billion placement ceiling, the additional lending would be only N5.5 billion per bank, and will likely be less than one of the total loans outstanding. In our view, the additional liquidity will likely move to the interbank market rather than lending.”

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The new CBN’s policy: The Central Bank had directed that banks’ daily deposits placement through the CBN’s Standing Deposit Facility, shall no longer exceed N2 billion

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This new policy was made known in a circular titled, “Guidelines on accessing the CBN Standing Deposit Facility.”

Penalty for not adhering: According to the circular signed by the Director of Financial Markets Department of the apex bank, Angela Sere-Ejembi, daily deposits by any bank in excess of N2 billion shall not attract interest payments.

Famuyiwa Damilare is a trained journalist. He holds a Higher National Diploma (HND) in Mass Communication at the prestigious Nigerian Institute of Journalism (NIJ). Damilare is an innovative and transformational leader with broad-based expertise in journalism and media practice at large. He has explored his proven ability in the areas of reporting, curating and generating contents, creatively establishing social media engagements, and mobile editing of videos. It is safe to say he’s a multimedia journalist.

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Business News

Unilever announces the completion of its Group legal structure

Unilever PLC has announced the completion of the unification of its Group legal structure

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Unilever Overseas increases stake in Unilever Nigeria Plc

Unilever, the parent company of Unilever Nigeria Plc, has announced the completion of the unification of its Group legal structure under a single parent company, Unilever Plc.

According to the press release issued by the company, from today, 30th November 2020 and for the first time in its history, Unilever now trades with one market capitalisation, one class of shares, and one global pool of liquidity, whilst also maintaining the Group’s listings on the Amsterdam, London, and New York stock exchanges.

What they are saying

Nils Andersen, Chairman of Unilever, said: “This is an important day for Unilever and we would like to thank our shareholders for their strong support of our Unification proposals, which gives us greater flexibility for strategic portfolio change, remove complexity, and further improve governance.

There will be no change to the operations, locations, activities or staffing levels in either the Netherlands or the United Kingdom as a result of Unification. The headquarters of Unilever’s Foods & Refreshment Division will continue to be based in Rotterdam and the Home Care and Beauty & Personal Care Divisions will continue to be headquartered in the United Kingdom.”

What to expect

This development has no impact on the going concern of Unilever Nigeria Plc, the shareholding structure, as well as the free float shares of the company on NSE, which totals 1,491,985,247 — representing 25.97% of the ordinary shares of the company issued and fully paid for by investors.

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(READ MORE: Q1 2020 Unaudited Report: Unilever Nigeria records N13.3 billion revenue) 

However, upon the completion of the unification of the Group’s Legal Structure, Unilever overseas under this structure remains in control of the 74.03% ordinary shares of the Nigerian subsidiary.

What you should know

  • For investors on the London Stock Exchange, Euronext Amsterdam, and the New York Stock Exchange, dealings in new Unilever Plc shares commenced today, as the new Unilever Plc shares will be admitted to the Premium Listing segment of the Official List of the UK Financial Conduct Authority (“FCA”) and to trading on the London Stock Exchange’s Main Market for listed securities, with the ticker “ULVR”.
  • Unilever Plc shares will also be admitted to listing and to trading on Euronext in Amsterdam under the ticker “UNA” today. It is expected that Unilever Plc ADSs will be admitted to trading on the New York Stock Exchange this afternoon.
  • Following the issue and allotment of 1,460,713,122 new Unilever Plc shares pursuant to Unification, which represent 55.56% of the total number of Plc shares, Unilever Plc’s total issued ordinary share capital today consists of 2,629,243,772 ordinary shares of 3 1/9 pence each.
  • As part of Unification, Unilever NV ceased to exist yesterday, 29 November 2020, which means there has been no dealings and there will be no further dealings in any Unilever NV securities (including Unilever NV shares on Euronext in Amsterdam).

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Appointments

May & Baker announces the appointment Patrick Ajah as Managing Director

May and Baker Nigeria Plc has announced the appointment of Mr. Patrick Ajah, as the Managing Director.

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Senator Danjuma, May and Baker Plc

The Board of Directors of May and Baker Nigeria Plc has announced the appointment of Mr. Patrick Ajah, as the Managing Director of the company, with effect from 1st January 2021.

This disclosure was made in a notification issued and signed by the Company’s Secretary, Mrs. Adetoun Abiru.

According to the notification, Mr. Ajah would be replacing Mr. Nnamdi Nathan Okafor as the Executive Director and Managing Director of the Company, with effect from 1st December 2020.

The board disclosed that this is according to the resolution passed at the Board Meeting of May & Baker Nigeria Plc, which held on Thursday, 26th November 2020 at the Muson Centre, Onikan, Lagos, after it had confirmed the retirement of Mr. Nnamdi Nathan Okafor as Executive Director and Managing Director of the Company.

(READ MORE: NIPC grants tax holiday to Honeywell, Savannah Sugar, 4 others with N175.28 billion investments)

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The statement said that Mr Ajah “is a passionate and visionary leader with over two decades of progressive experience and responsibility in a variety of business environments; from Pharmaceuticals to FMCG, Telecoms and Manufacturing.”

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Financial Services

CBN issues subtle warning explaining how domiciliary accounts should be used

The CBN has issued a new circular explaining how domiciliary accounts should be used.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

The Central Bank of Nigeria (CBN) issued a circular on Monday clarifying how domiciliary accounts will be operated in the country. According to the CBN, domiciliary accounts used to deposits export proceeds (inflow from exports of goods and services from Nigeria) can only be used for business operations.

The directive also allows any extra funds remaining in the domiciliary accounts to be sold in the Investors and Exporters (I&E) Window, suggesting that the CBN is warning exporters not to sell their foreign proceeds in the black market.

This disclosure was made in a circular dated November 30, 2020, issued by CBN to all authorized dealers and the general public and signed by its Director for Trade & Exchange Department, Dr O.S. Nnaji.

On Export Proceeds

These accounts will continue to be operated based on existing regulations which allow account holders use of their funds for business operations only, with any extra funds sold in the Investors & Exporters window.’

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On other domiciliary accounts

“Where accounts are funded by electronic/wire transfer, account holders will be allowed unfettered and unrestricted use of these funds for eligible transactions. Where accounts are funded by cash lodgments, the existing regulations will continue to apply.”

The CBN also claimed it was issuing these clarifications in view of its “vastly improved capabilities of the CBN to monitor transactions, forestall money laundering and prevent the adverse effect of dollarization in Nigeria’s economy” which the CBN has frowned upon for years.

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The CBN’s statement also alluded to the use of BVN in tracking compliance with its guidelines.

What this means

The latest regulations from the CBN appears to be directed at clarifying widespread information that there are plans for a clampdown of domiciliary accounts.

  • For export proceeds, this circular appears to be warning exporters to use their forex proceeds for “legitimate” transactions and sell the rest in the I&E window instead of selling it in the black market.
  • On Domiciliary accounts, the CBN is basically saying that inflows through electronic wires will be allowed for use by Nigerians for transactions deemed eligible. This means, if you received a foreign transfer into your account, you can use it to pay for transactions such as e-commerce payments or transfers to anyone at any time.
  • However, for dollar cash deposits into your accounts, the central bank is reiterating that there will be restrictions on how that money used such as restricting it from direct transfers or even using it to pay for e-commerce transactions. These rules have existed for some time.
  • Currently, a limit of $10,000 applies when you want to utilize foreign currency cash deposits.
  • The central bank is basically dissuading the black market purchase of forex by limiting the number of dollars that can be purchased on the streets where forex is sold in the black market. However, the majority of black market transactions, particularly in dollar value are traded using wired transfers.

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