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Bank CEO reveals what can prevent growth of telecoms’ mobile money

Since the Central Bank of Nigeria (CBN) approved that telecommunication companies should operate of mobile money, there have been talks about the future of banks and how the network providers can affect the growth of lenders.

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Ever since the Central Bank of Nigeria (CBN) approved that telecommunication companies should operate mobile money, there have been talks about the future of banks and how the network providers can affect the growth of lenders. It has however been revealed that the growth of telecom’s mobile money service is dependent on the regulation of the Apex bank. 

Speaking on his experience in the mobile money business, the Chief Executive Officer, Standard Chartered Bank for Nigeria and West Africa, Lamin Manjang, said while telecoms have succeeded in the mobile payment business in Kenya, the network providers have failed in some countries. 

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Prior to his career at Standard Chartered Bank, Manjang worked as the Chief Finance Officer at Safaricom in Kenya. He was involved in the establishment of M-Pesa, arguably the most successful mobile money service in Africa. M-Pesa was founded by Safaricom in Kenya. 

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According to Manjang, what can stop the growth of mobile money service owned by telecoms is the regulation of the country. He said countries, where telecom-led mobile money didn’t succeed, had tight regulations, and this prevented the service from gaining ground, explaining that the success of M-Pesa was due to the supportive regulation of Kenya’s apex bank. 

“The good thing about the M-Pesa was that at that time, the regulator was very supportive, so the Central Bank of Kenya saw that it was an innovative development and that ‘though it is in the telecom space, let us allow it to flourish and see how it goes … Others have tried it, but their regulations could be too tight and, therefore, the opportunity for the product to gain ground would be lost.  

“So, for now, if you go to Kenya, M-Pesa is a way of life; everything from paying your maid to your driver, shopping, paying for a visa is done through the M-Pesa platform. That has also helped in financial inclusion, so Kenya has a financial inclusion rate of about 75% which is one of the highest across the continent.  

“I know Nigeria is also very keen to increase the financial inclusion matrix, and of course, the Central Bank (of Nigeria) has indicated that it is very supportive of measures to get telco to start in that space, banks to look at agencies banking model to be able to reach out. I think we can learn some lessons on what other markets have done and see how we can improve statistics inclusion in Nigeria.” 

[READ ALSO: A breakdown of how some billionaires gained and lost money last week]

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Manjang wants banks to lead: Mobile money service is successful in Kenya because the operation was telecom-led, however, Manjang wants banks to lead the mobile money-drive in Nigeria because banks have taken the initiative compared to what happened in Kenya when the mobile money discussion began in the East African country. 

“That is a debate. Of course, in Kenya, it was telco-driven though banks will like it to be bank-driven… I think the banks in Nigeria have clearly taken the lead as opposed to Kenya where Safaricom took the lead. At the end of the day, what we want is for the customers to get the best value for money. It will be bank-led obviously for me. 

“If you don’t play in the space, then you give a chance for somebody else to come and play in that space. So, this is our space; payment and money are our strengths.” 

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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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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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.

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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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