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CBN reveals plans to deduct bad loans from bank balances of defaulters in any bank in Nigeria

CBN, Bankers Committee agree to recover bad loans from accounts of defaulters in any bank in Nigeria. How it will work…

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CBN reveals Aishah Ahmad

Reports reaching Nairametrics indicate the Central Bank of Nigeria (CBN) in conjunction with the NIBSS and the Bankers’ Committee have agreed to launch an initiative that will allow lenders to recover loans from deposit accounts of loan defaulters from any bank or financial institution in the country. 

Media reports monitored by Nairametrics reveal this decision was announced by Aishah Ahmad, the Deputy Governor of the CBN at the end of the meeting of the Bankers’ Committee held in Abuja on Monday 26th of August.  

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Reasons: According to TheCable, Ahmad said the directive was to encourage banks to increase lending in the country with more comfort. 

[READ MORE: CBN issues disclaimer: Warns public to beware of false loan empowerment scheme]

  • Confronting credit challenges: Ahmad said, “We are not unaware of the challenges/reasons why credit has not been growing. Part of that was the appetite of banks to lend especially when you have customers that willingly refuse to pay their loans.  

“In this respect, we have come up with a new clause that will be included in the offer letters that will be granted going forward.” 

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  • Leveraging on BVN and TIN: According to the report, Ahmad also said, “This is going to be a credit risk protection clause. Basically, it will contain the BVN details and TIN of the customers and more or less it will be a commitment on the part of the customers that you agree that should you default on the loan, the total amount of deposits you have across the banking industry would be applied towards repaying the loan.” 

How this will work: Nairametrics also understands that the new system might be handled by the NIBSS on behalf of the banks in exchange for fees. This is how we understand it will work: 

  • A bank lends money to a customer under the typical terms and conditions. However, all banks which sign up to this arrangement will have to get their borrowers to sign a right of setoff against their balances across any bank. 
  • Right of setoff has existed among banks in the past but hasn’t been as effective as it should be. This arrangement should now make it easier for banks to benefit as NIBSS will basically operate it on their behalf. 
  • Once a customer defaults on their loans, relying on BVN, NIBSS will first recover the loans from the defaulter’s balance in any account within the bank. If that is not enough, it will proceed to other accounts deposited in other banks. 
  • We understand this service only applies to individual accounts only. Thus, it may not function for accounts that have more than one signatory 
  • They will also only recover Principal Amounts as this may not apply to penalties, fees, and charges.
  • The Federal Inland Revenue Service can also request for tax payment to be deducted at source using BVN and Tax Identification Number (TIN) to debit customer accounts.  
  • From what we read, the banks will continue to recover their money from any accounts tied to the BVN until it is fully paid. They might also limit to just 90% of the amount in the bank. 
  • All financial institutions that accept deposits can partake in this scheme.

It is however not clear how FinTEch firms also operating in the lending space will benefit from this initiative. Most of them are not deposit-taking banks or institutions.  

Why this is important: The CBN has mandated Nigerian banks to increase lending to SME’s and the private sector in general rather than concentrate on a few obligors (debtors).  

  • Recent report from the National Bureau of Statistics revealed that about 1,887,877 obligors (debtors) borrowed about N15.2 trillion as at the first quarter of 2019.  
  • Out of this amount, the top 100 debtors alone borrowed N7.4 trillion or 47% of total credit to the private sector. Top 5 customers alone borrowed N2 trillion. 

To provide bank and other lending institutions comfort and as an incentive, the CBN believes moves like this will help reduce default rates among banks. Non-performing Loans (NPL) was 9.36% as of June 2019, the lowest in about 40 months. Initiatives like these as well as the collateral registry is expected to help reduce credit risk. 

[READ ALSO: Forex ban on food import has commenced, says CBN]

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Patricia

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

Oando loses Chief Legal Officer

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Oando loses Chief Legal Officer

Chief Legal Officer of Oando Plc, Ngozi J Okonkwo is dead.

Adewale Tinubu, Group Chief Executive Officer of Oando Plc announced this via a tweet.

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Until her death, she was the Chief Legal Officer of Oando Plc, having joined the company as Head, Legal Services of the company in 2009.

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According to a tweet from one of her nephews, she battled cancer for a while, recovered before having a relapse during the recent COVID-19 crisis.

READ ALSO: NSE, SEC train capital market operators on legal and regulatory requirements for the derivatives market

Before joining Oando, she worked as Junior Counsel  with F.O Akinrele & Co., and also with KPMG Professional Services (previously known as Arthur Andersen) as Manager in the Tax, Regulatory and People Services unit and Head of indirect tax services.

READ ALSO: Common legal and general mistakes made by new businesses (Part 1)

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She obtained LLB (Hons) from University of Nigeria, Nsukka in 1997 and BL from the Nigerian Law School, Lagos in 1999. She was a member of the Nigerian Bar Association, honorary fellow of the Association of Fellows and Legal scholars of the centre for International Legal Studies, Austria, Associate Member of the Chartered Institute of Arbitrators, United Kingdom and Associate Member of the Chartered Institute of Taxation, Nigeria.

Patricia

 

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Economy & Politics

NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

The Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.  

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NNPC, Domestic Crude Allocation, Why NNPC’s Duke Oil is quitting London operations for Dubai , NNPC divests stake in four oil wells to NPDC , How NNPC discovered oil, gas deposits in the North , Nigeria to leverage on condensate refineries to be petrol net exporter, How NNPC saved $3 billion from arbitration , NNPC, IPPG donate medical supplies to South West state governments, NNPC discloses bases for employment and managerial progression in the oil firm, NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

To cushion against the volatility in the global crude market and strengthen profitability, the Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.

This is one of several measures the corporation is taking to sustain revenue generation for Nigeria, and cope with the boom and bust cycles which are gradually becoming a feature of the global crude oil market.

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NAN reports that this was contained in a statement from the Corporation Chief Operating Officer, Ventures and Business Development, Mr. Roland Ewubare, and signed by NNPC Spokesman, Kennie Obateru.

According to Ewubare, the NNPC will establish Independent Power Plants using the Ajaokuta-Kaduna-Kano (AKK) pipeline network, and consolidate its presence in the power sector.

(READ MORE: COVID-19: Nigerians react as CBN partners NNPC to feed, accommodate Nigerian returnees)

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The statement reads in part; “NNPC is creating an energy company that would have portfolios in renewable energy; we have initiatives on solar that is ongoing.

“We have got biofuels agreements with some state governments that would soon be activated. We do have a lot of non-core businesses that are aggregated under the Ventures and Business Development Autonomous Business Unit of the NNPC. 

“This would be expanded through effective collaboration and partnership with the private sectors,” 

NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

Lower costs, more profits

As part of moves to improve profitability, the NNPC also announced plans to drive crude oil production cost down to 10 dollar per barrel by Q4 2021,

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This according to the statement would be done by systematically and gradually beating down logistics costs.

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The Corporation’s revenue took a major hit in 2020 due to the slump in global oil prices, and this in turn affected the Nigerian budget given that oil proceeds account for a significant fraction of her income.

“When you have a low commodity price regime, as the case now, the only way we are able to squeeze out some reasonable cash and financial gain to the nation is by curtailing and constraining our costs in line with the GMD’s aspiration to push for a 10 dollar per barrel cost of production,” Ebuware said.

(READ MORE: NNPC pipeline vandalism up by 50% in January, may suspend crude oil production)

There is also an ongoing collaboration with selected partners to commercialise flared gas in order to preserve the flora and fauna of the country.

This would be done by converting it to Compressed Natural Gas (CNG) and Liquefied Natural Gas, for sale to consumers.

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The NNPC is partnering with private developers to reduce the housing deficit in the country and also partnering with medical centres to provide innovative healthcare for Nigeria.

 

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Business News

Microsoft Teams’ rival, Slack shares drop on withdrawal of full-year billings guidance

Slack reported steady revenue growth 50% in Q1 2020, compared with 49% recorded in Q1 2019 on an annualized basis this brought in more customers

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 Slack shares dropped as much as 17% yesterday after the company’s reported first-quarter earnings.

Investors and stock traders were not happy with Slack’s annual revenue forecast of $855 million to $870 million, up just slightly from Slack’s projection in March stock analysts, on the average, estimated $856.5 million, according to data obtained from Bloomberg.

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“Slack’s withdrawal of full-year billings guidance looks conservative to us and likely suggests a pull-forward of revenue amid faster new-customer additions due to remote work,” Mandeep Singh, a Bloomberg Intelligence analyst, wrote in a note yesterday.

Slack grew revenue 50% in Q1 2020, compared with 49% recorded in Q1 2019 on an annualized basis.

However, Slack reported steady revenue growth during  Q1 2020 brought in more customers, as organizations sought to keep communications going with their newly remote workforces during coronavirus pandemic. It had earnings per share of 2 cents loss per share, adjusted and adjusted revenue of $201.7 million

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(READ MORE: How to Profit from Directors’ Share Dealing Notifications)

Slack, in a statement, yesterday reported that it added a record 12,000 paid customers Q1 2020 as against two prior quarters when it added about 5,000 new customers. Slack’s top competitor, Microsoft’s Teams, has also experienced growth in recent months.

“What you saw with Zoom, what you saw with Teams is a great indication that this is not apples-to-apples and that the products are not truly competitive with one another,” Butterfield the Chief Executive Officer of Slack told Investment analysts on a conference call yesterday.

READ ALSO: Jumia is optimistic of COVID-19 boost, despite poor Q1 2020 earnings report

Paid users spent over 120 minutes per day in Slack at the end of the quarter, up from below 90 minutes one quarter earlier. 

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“I can’t care about the stock price on the level of individual days,” Butterfield said when asked about the reaction to earnings. “I just wouldn’t be able to do my job. I care about where the share price is five years from now and 10 years from now. This is just a very volatile time.” 

Patricia

 

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