The Central Bank of Nigeria (CBN) has imposed “penalties” on twelve Nigerian banks for breaching the regulator’s directive on lending to the real sector of the economy. The CBN debited a combined sum of N499.1 billion from the vault of the banks and will hold the cash at zero percent interest rates. Most analysts see this as a penalty on the banks affected.
Nairametrics had reported that the CBN directed banks to maintain a minimum Loan Deposit Ratio (LDR) of 60 percent by September 30, 2019. The LDR was reviewed upwards from 58.5% to 60% with the banks informed to main the LDR till September ending. The LDR has now been increased. All DMBs are to now attain a minimum LDR of 65% by December 31, 2019.
The banks had been warned by CBN Governor, Godwin Emefiele, of a penalty if they failed to attain the LDR by ending of September 2019. The CBN Director, Banking Supervision, Ahmad Abdullahi, had also stated in July that, “Failure to meet the above minimum LDR by the specified date shall result in a levy or additional Cash Reserve Requirement equal to 50% of the lending shortfall of the target,”.
List of banks affected: The following banks couldn’t maintain the LDR and their accounts were purportedly deducted as follows;
- Citibank (N100,743,055, 321)
- First Bank of Nigeria (N74,668,880,480)
- FBNQuest Merchant Bank (N2, 697,456,144)
- First City Monument Bank (FCMB) (N14, 371,064, 742)
- Guaranty Trust Bank (GTBank) (N25, 147, 933, 628)
- Jaiz Bank (N7, 525, 165,552)
- Keystone Bank (N4, 162, 938, 879)
- Rand Merchant Bank (N2, 823,177,399)
- Standard Chartered Bank (N30,027,137,984)
- SunTrust Bank (N1,703,205,427)
- United Bank for Africa (UBA) (N99,676,181,916)
- Zenith Bank (N135,629,337,625).
In July, Emefiele had blamed the inability of banks to lend to the private sector on the latter’s choice of investing in risk-free securities rather than lending to the real sector of the economy. Although this directive to encourage Small and Medium Enterprises (SMEs), retail, mortgage, and consumer lending places banks at higher risk, it will be a major boost for Nigeria’s real estate sector.
Also, home buyers with good jobs may easily secure mortgages as more banks will consider this a better lending option since the loans will be secured against the property.
Reacting to reports by a section of the media describing the deduction as heavy fine of banks, the CBN has clarified that the deductions were only proportionate to the levels of default and banks are not losing the money. Nairametrics had also earlier reporting this deduction as a fine.
CBN’s Director of Banking Supervision, Mohammed Abdullahi at the end of the Bankers’ Committee’s meeting reportedly disclosed:
“It is wrong to say the deductions are fine because the banks are not losing the money to the CBN. The only implication is (that) the amount debited would not be invested in money market instruments by them. Once the affected banks raise their lending to the deposit threshold, their accounts will automatically be credited.
“CBN never said there is going to be a fine. The circular said at the cut-off point in the event of banks not meeting the threshold, funds would be debited from you and added to your CRR. What you have there is not a fine, neither is it a levy, but a shortfall based on the parameters set by the CBN. It is going to be a continuous process.”
Note: An earlier version of this article described the deduction as a fine. This has now been corrected as a “penalty”.
Dangote Cement to extend clinker export to other African countries
Dangote is on course to sell more clinker across West Africa and commence shipment to Central Africa in H2 2020.
The Management of Africa’s largest cement producer, Dangote Cement Plc (DCP), disclosed during a virtual event yesterday, that the cement producer is set to commence clinker export to other African countries within the next few weeks.
The Acting Group CFO, Guillaume Moyen, made this known in his presentation at the joint virtual event with NSE, tagged “Facts Behind the Figures and Sustainability report’’ on Wednesday, 24th September, 2020.
Backstory: In its half-year report, the Management of Dangote disclosed that on 12 June 2020, the maiden shipment of 27.8Kt of clinker from Nigeria to Senegal left the Apapa Export Terminal.
The Management reiterated that the company is on course to sell more clinker across West Africa, and commence shipment to Central Africa in H2 2020. As it is in line with the Group’s vision of making West and Central Africa, cement and clinker independent, with Nigeria the main export hub.
The absence of limestone in much of West Africa, especially those in the coastal states, forces those countries to import bulk cement and clinker from Asia and Europe, and this is quite expensive.
However, Dangote Cement plans an ‘export–to–import’ strategy, positioning Nigeria as the main export hub of the continent, in a bid to serve West and Central Africa countries from Nigerian factories, making the region cement and clinker independent.
This is consistent with the Group’s vision of cementing Africa’s economic independence, as this would lead to lower clinker cost for pan-African operations, due to the proximity of Nigeria to these countries, as clinker landing cost will be cheaper.
The Management emphasized that this is possible, as Nigeria can serve a potential market of 15 countries, with over 350 million people, given the county’s relative abundance of quality limestone, especially in key Southern regions.
It is important to note that DCP’s clinker volume, according to figures contained in its H1 2020 results, has increased to 60Kt from 12kt in H1 2019, which translates to 400% increase.
The benefits of DCP’s export strategy
It is noteworthy that the innovative strategy of Dangote Cement Plc is expected to;
- Cement Africa’s economic independence, and contribute to the improvement of continental, regional, and intra-regional trade, as the company seeks to make regional and continental free trade agreement a reality.
- Ensure that the increase in production due to exports, leads to increase in capacity utilization in the Nigerian operation, and in turn, reduces fixed cost per tonnes.
- Increase foreign revenue exchange for the Nigerian operation, and offset foreign exchange risks.
- Reduce clinker landing cost, by leveraging on the proximity of Nigeria to other African countries.
Some of the benefits of our export strategy are Higher capacity utilization of our facilities; Ecowas benefits; Foreign exchange; and Lower clinker cost for Pan-Africa operations – @guillaumemoyen
#NSEhostsDangote https://t.co/TGd2N6JGZw pic.twitter.com/TvPGHunsb0
— The Nigerian Stock Exchange (@nsenigeria) September 23, 2020
Trade facilitations, key to AfCFTA implementation – Customs
The Customs boss said Nigerian exports have suffered setbacks relating to Rule of Origin issues.
Nigerian customs says the facilitation of trade requirements ranging from Pre-Arrival processes to Electronic Payments of duties would be important for the AfCFTA implementation for Nigeria.
This was disclosed by Abdullahi Babani of the Nigerian Customs Service represented by HJ Swomen (Comptroller Import and Export) on Thursday at the AfCFTA Sensitization Seminar organized by the National Action Committee of the implementation of the agreement.
Mr Swomen said the Customs is working to integrate systems with West African neighbours to prevent dumping of goods through Rules of Origin measures.
“Liberalization of 90% of tariff lines will affect customs revenues. About 85% of import come from outside Africa, leaving about 15% from the continent, but the agreement is an opportunity for Nigeria to boost exports and production,” he said.
He added that Nigerian exports have suffered setbacks relating to Rule of Origin issues and urged for a mutual exchange of data between Customs administrations in the continent.
He said that the Nigerian Customs has already begun cooperating with its counterparts like the ECOWAS Common External Tariff (CET) and the Joint Committee on Commerce Agreement signed with Benin Republic in 2004.
However, challenges still exist in the form of engagements with the Beninese Customs on Cross Border Trade Facilitations including joint border posts, mutual escort of transit goods and the interconnection of systems of both parties, which is on-going.
On requirements need for Trade facilitation he said the Customs Service has upgraded its Pre-Arrival processing, Electronic Payment, Expedited release of perishable goods, provisional release of relief materials and Dispute resolution mechanisms.
African free trade will boost development of manufacturing in Nigeria – NEPC
The Nigerian Export Promotion Council (NEPC) says that the implementation of the African Continental Free Trade Area (AfCFTA) will serve as a catalyst for industrialization and development of the manufacturing sector in Nigeria.
This was disclosed by the NEPC Director Export Trade, Mr. Sidi-Aliyu Abdulahhi on Thursday at the AfCFTA Sensitization Seminar organized by the National Action Committee of the implementation of the agreement.
Mr. Abdulahhi said the AfCFTA is the largest free trade area since the WTO (in terms of countries participating) and will cover a market of 1.3 billion customers which would be beneficial for Nigerian producers. The trade agreements will promote infrastructural development for easy transportation of goods and services across the continent.
The liberation of trade in Africa will strengthen Nigerian SMEs for regional trade and be a catalyst for extending operations outside Africa. “The AfCFTA will promote diversification of the economy from extractive products like oil and minerals to non-oil products that were previously underutilized,” Abdulahhi added.
He disclosed that AfCFTA stakeholders are currently working to develop a digital framework to support an e-commerce platform to enable member nations to trade safely in the midst of the pandemic.
On challenges facing the implementation, he urged the need to conduct a gap analysis on the readiness of Nigeria to AfCFTA, for a successful implementation.
He said the implementation constraints primarily lies with the government while the private sector may experience capacity constraints.
Other challenges will include high-interest rates, unreliable power supply, inadequate power supply, ease of doing business environment and SME capacity development for the requirements to participate in regional and global value chains.
He urged for the institutional framework to address rule of origin of goods and also technical barriers to trade SPS through the implementation of verification mechanisms.