The MD/CEO of Access Bank Plc, Herbert Wigwe revealed the bank has set a daily target of N400 million loans to at least 20,000 customers. Mr. Wigwe made this comment during the bank’s investor and analyst call on Monday, September 9th, 2019.
Competition: Nigerian Banks are in stiff competition with FinTech startups over what is regarded as the highly lucrative Quick Loan Segment. FinTech’s startups with a huge financial war chest from patient investors have deployed their cash towards marketing and tech innovative products that have changed the way borrowers receive money via loans.
Currently, Nigerians who qualify for these loans can obtain them between 5 minutes to less than a day with no collateral or documentation. Some obtain the loans via native mobile apps owned by the FinTechs relying only on their phone numbers as documentation. These aggressive initiatives have put the banks on the defense, resulting in the release of competitive quick lending products.
Target: Access Bank claims its Quick Loan Scheme or Payday Loan (as the bank calls it) disburses about N200 million daily to 4,600 customers and the bank is eager to double that number to N400 million and 20,000 customers by end of the year.
“We have also grown our digital loan business as far as our financial inclusion and normal traditional retail strategy by expanding on our digital lending capabilities to include more products such as salary advancements, small tickets, personal loans and device financing in addition to what we call our payday loans.
And all of this is done on our QuickBucks application which basically houses all of these products. Today we are disbursing on average ₦200 million to 4,600 different customers through the click of a button daily. And we have set for ourselves a target of about ₦400 million daily to at least 20,000 customers, and we are on course to achieving this. This basically generates very low NPLs and is properly priced because a lot of it goes to customers who have their salary accounts” Wigwe
Charges: Access Bank charges an upfront fee of 1% flat, 4% flat interest and insurance of 0.15% of the loan amount is taken upon loan disbursement (5.15% total all payable upfront). The loans are for 31 days.Average all-in lending cost in the market is between 4-6% monthly.
On the offensive: Access Bank also claims it has been aggressive with the marketing of its payday loans and has now booked about N18 billion in the first half of 2019 alone from N11 billion a year earlier. The CEO also claimed the bank has issued out about 1 million unique loans as at June this year.
Default rates: Quick lending loans are highly susceptible to default risks so we sought to know what the bank’s response what. They reported that default rates for its payday loans are below 3% claiming that in most cases it is 0%. Explaining further, they assert that the reason for the low default rates was because their borrowers were salary earners who already have accounts opened with the banks and their salaries domiciled in those accounts.
“So for the digital loan book, which is largely dominated by payday loans at the minute, the NPL ratios there have typically been well below 3%. Now, the reason for this as Herbert alluded to earlier on is they are based on customers who already have their salaries with us. Therefore, typically the loans do not go bad in the traditional sense. In some cases, you might find the occasionally delayed salary payment, for that period we might see an inching up in the NPL ratio. But the NPL when you get the salaries as you know is going to be very low for a long time to come. So those are the kinds of ratios you have seen. There are periods when it is 0%. Almost every employer has fully paid up the salaries. When there are delays in payment typically in some cases it can take three or four months for those salaries to come through. Eventually, they come through and the NPL again trends to 0%.”
On the bank’s website, they highlight that you do not need to have a salary account in Access Bank for you to access the Payday loan. The bank claims you will, however, need to open an account in the bank for the loan to be disbursed.
What this means: Nigerian Banks may not be nimble, but they have the financial muscle to engage in a long-drawn battle in the quick loan space.
- While stifling regulations and inroads into this space by deep pockets like MTN remains a huge threat, their acquisition route is shorter as most of the borrowers are already customers within the bank.
- Access Bank claims it has 31 million customers and acquires at a rate of 500,000 new customers daily relying mainly on digital means and its agent banking initiative.
- Access Bank has signed up about 1.6 million new customers since it merged with Diamond Bank.
Lagos to open churches, mosques from June 19, limits gatherings to 40% capacity
Religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
Lagos State government says religious gatherings would be allowed to reopen on June 21, 2020. This was disclosed by the State Governor, Babajide Sanwo-Olu on Thursday during a press briefing at Government House, Marina.
According to the Governor, mosques are to reopen from June 19 while churches are to begin services from June 21 and only Friday and Sunday services should be held for now, as other regular services, including night vigils, must be put on hold.
He said, “There will now be restricted openings of religious houses based on compliance that we have seen and reviewed with the Safety Commission.
“From 14 days time, precisely on the 19th of June for our Muslim worshippers and from the 21st of June for our Christian worshippers, we will be allowing all of our religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
“But we know that these places of worship have different sizes but even if your 40% capacity is really so large, you cannot have beyond 500 worshippers at once, and keeping that maximum 40% capacity is really important.
“We will be encouraging people to have more than one service and ensure that they keep their premises clean, disinfect before another round of worship can take place.
“We will also be advising that there should only be mandatory Fridays and Sunday services. All other night vigils and services must be put on hold for now until we review our current situation.
Sanwo-Olu added that the state will also be advising that persons below the age of 15 because of how well they walk around should be excused from the places of worship and citizens that are above the age of 65 should not be allowed into these places of worship.
FG may lift ban on interstate movement on June 21
Interstate movement may resume on June 21.
The Federal Government may lift the ban placed on interstate movements on June 21, 2020.
This was disclosed by special adviser to President Muhammadu Buhari on new media, Bashir Ahmad on Thursday via his Twitter handle.
He stated, “Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr Dani Aliyu, gave the hint recently, as domestic flights expected to resume on June 21.”
Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr. Sani Aliyu, gave the hint recently, as domestic flights expected to also resume on June 21.
— Bashir Ahmad (@BashirAhmaad) June 4, 2020
Meanwhile, the FG last Monday, June 1, 2020, announced a cautious advance into the second phase of the national response to COVID-19. As part of the measure in the new phase, the FG has announced the full reopening of the financial sector.
This was announced by the national coordinator of the presidential task force on COVID-19, Dr Aliyu Sani. He said that the banks will now be allowed to operate at normal working hours five days a week as against the restricted time of 2 or 3 pm that was announced during the first phase of the easing of lockdown.
The Presidential Task Force also gave the green light to hotels to reopen but must do so based on the guidelines rolled out by the National Centre for Disease Control (NCDC). They are to maintain non-pharmaceuticals intervention. However, gyms, cinemas, parks, nightclubs and bars are to still remain closed until further evaluation.
The restaurants, other than those in hotels must remain closed to eat-ins but are allowed to prioritize and continue to practice the takeaway measure that has been in place since the first phase.
The conundrum in the retail pricing of PMS
Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.
The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.
We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.
In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.
Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.
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