In a bid to ensure that financial institutions comply with its specific requirements for loan disbursement, the Central Bank of Nigeria (CBN) has warned banks not to enforce insurance on borrowers.
The CBN has directed banks to stop mandating borrowers to patronise specific underwriting companies to buy insurance covers before they can access some loans.
The apex bank warned the banks in its Consumer Protection Guidelines on ‘Responsible Business Conduct’.
Why this matters: It is of common knowledge that banks direct their potential borrowers to take insurance covers to protect the loans they plan to obtain.
Nairametrics understands that the banks do this to avoid unforeseen circumstances that may hinder the borrower’s ability to repay their loans.
Due to circumstances like permanent disability, death, amongst other survival-threatening challenges one cannot predict, some banks have insurance firms as subsidiaries while others have close relationships with insurance firms.
The CBN is however concerned about cutting down bad loans. It is in this light that the apex bank put some requirements in place. The requirements were put in place to ensure that consumers’ capability to repay credits is efficiently assessed.
According to the Central Bank, the requirements were described in credit risk assessment procedures, the type and circumstances for which credit would be suitable, as well as clear lines of authority for approving the product.
The apex bank made known that the requirements also assessed the capability of customers to repay the credit in a sustainable manner, taking into consideration the customers’ financial circumstances.
It also set clear policies and procedures on consumer loans to ensure that customers who are unable to meet their repayment obligations due to ill health, unemployment or other disabilities are treated fairly and with due consideration.
As part of the banks’ regular monitoring of loan performance and upon early detection of signs of repayment difficulties, the CBN said they must inform consumers of the importance of timely engagement with the financial institutions to discuss alternative repayment measures.
It said they should make reasonable efforts to offer an alternative repayment plan that is appropriate to the customer’s changed circumstances and financial situation.
Meanwhile, the microfinance bank industry recorded a 5.2% decline in non-performing loans in 2018. While the industry struggled in terms of profitability as Profit Before Tax stagnated at N16.2 billion during the year, the bad loans dropped to N25 billion from N26.18 billion in 2017.
Just In: PPPRA reduces petrol price to N121.50 per litre
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price…”
The Petroleum Products Pricing Regulatory Agency (PPPRA) has announced a new retail price band for oil marketers.
In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:
“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price with the corresponding ex-depot price for the month of June 2020, as follows; price band N121.50 – N123.50 per liter.”
Hedge funds, institutional investors rush to own stakes in Bitcoin
Hedge funds are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
With global economic uncertainty gradually becoming a daily norm, institutional and hedge funds around the world have been rushing to have a stake in crypto assets which all have been outperforming other financial assets in 2020).
Just recently, a popular hedge fund based in New York –Grayscale Investments –caught the investment world by surprise by buying up Bitcoin (BTC) at a great rate in recent months.
Lennard Neo, the head of research at Stack Funds, told Cointelegraph that institutional investors have been seeking for other options, not just to provide returns, but also to hedge their existing portfolio from downside risks. Neo said:
“Similar to Grayscale, Stack has seen an uptick in investors’ interest — almost double that figures of pre-crash in March — in Bitcoin. I would not say they are ‘gobbling up BTC’ blindly but cautiously seeking traditional structured solutions that they are familiar with before making an investment.”
In addition, Paul Cappelli, a portfolio manager at Galaxy Fund Management, explained in detail the reasons for this demand. According to him, “we’re seeing increased interest from multiple levels of investors’ wealth channels, independent RIAs, and institutions.
“The recent BTC halving came at an interesting time amid the COVID-19 outbreak and the growing unease about quantitative easing. He noted: “It clearly demonstrated BTC’s scarcity and future supply reduction as concerns deepened around unprecedented stimulus by the Fed with the CARES Act.”
Also, Michael Sonnenshein, the Managing Director of Grayscale Investments, explained briefly why his firm uses Bitcoin as an option in hedging its firm’s portfolio position.
“All three are facing issues this time around. Bitcoin has emerged as an alternative hedge, operating independently of the dramatic monetary policies enacted by central banks,” he said.
What you need to know about Hedge Funds
They are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
Measures introduced by Nigeria to ensure transparent use of the $3.4 billion IMF loan
Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.
Following the approval and disbursement of $3.4 billion Rapid Financing Instrument (RFI) to Nigeria, which is the largest COVID-19 emergency financing package so far released by the International Monetary Fund (IMF), the multilateral financial institution now expects transparent and accountable use of the funds.
The IMF’s financial assistance to Nigeria is meant to support the healthcare sector, stabilise the economy, and protect jobs and businesses that have been severely impacted by the pandemic.
The Bretton wood institution has been disbursing funds to work closely with member countries to ensure transparent and judicious use of the financial support, while making sure they are used for the intended purpose.
The IMF’s mission chief for Nigeria, Amine Mati, during a conversation, pointed out the measures to be taken by Nigeria in order to enhance transparency and governance in the use of the $3.4 billion IMF emergency financing.
According to the IMF chief, the Nigerian Government had committed to undertake an independent audit of crisis mitigation spending and related procurement processes, as well as to publish procurement plans and notices for all emergency response activities which include the names of companies that were awarded the contracts and the beneficial owners.
Mr. Mati also disclosed that special budget lines are to be created to record all crisis emergency response measures, which are published daily on Nigeria’s treasury online portal. These measures will not only ensure that financial assistance received as part of the COVID-19 response is used for its intended purposes, but will also significantly strengthen the oversight of the entire budget used for the government’s crisis response.
— IMF (@IMFNews) May 31, 2020
Implementing these measures will help to drastically reduce the governance and transparency challenges as well as corruption vulnerabilities of a country like Nigeria. Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.