Business News
COVID-19 wreaks havoc on earth but there’s hope
The on-going Coronavirus outbreak ravaging the earth has not only disrupted the personal plans of many, but also the global economy.
It is no longer news that the on-going Coronavirus outbreak (COVID-19) ravaging the earth has not only disrupted the personal plans of many, but also the global economy.
The cases keep rising day by day from country to country all across the globe. Recently, I talked about the implications the virus would have on the tourism sector in Africa, with specific reference to Kenya, Nigeria and South Africa. Apart from tourism, other sectors are in turn experiencing traumatic setbacks.
Yesterday, it was reported that Nigeria had announced its 30th case of the virus on its soil. In addition to the outbreak, oil prices in the country have also taken a huge blow. According to the report, Brent crude oil prices fell below $30 per barrel last week. This fall was the lowest of its kind since the year of 2003.
The drop-in oil prices has forced the International Monetary Fund (IMF) to cut its projection for Nigeria’s economic growth in 2020 to 2% from 2.5% some weeks ago.
My goal is not to scare you with fear-mongering and depressing news, but to provide ways Africa and the world can contain the virus without the further spread of the disease.
[READ MORE: Coronavirus outbreak to impact tourism across Africa)
In order to combat the COVID-19, countries around the globe must close all borders to foreign nationals to prevent the spread of the disease from an outside source. It is without a doubt that most of the cases of COVID-19 in Africa have been linked to the arrivals of foreign nationals from Europe and other continents.
The most logical thing for a country to do is to shut all borders for a 30-day period and allow the governments to implement the necessary quarantine requirements for people in order to eradicate the deadly virus.
Already on the African continent, countries like Kenya, Ghana and South Africa have gone ahead with a full border closure. The same has been done for a few countries in Europe as well. According to Al Jazeera, Kenya and Ghana have temporarily banned all foreign nationals from entering the country, except those who possess citizenship in these countries or permanent residency status.
It is true that border closure would severely hamper African countries that are dependent on imports from Europe, Asia and the Americas; however, it gives countries a chance to reevaluate and figure out new ways to fill the void for an absent product.
This was the case for Nigeria back in 2019 when the country partially shut its land borders in order to restrict the smuggling of illegal items into the country. The partial border closure has been seen in some quarters as a blessing and relative independence for the country’s agricultural sector especially.
Report also has it that stakeholders in the food and agriculture industry claimed that businesses grew following the border closure. Indeed, their assertions were proven to be correct. There was a spike in locally produced rice, which caught the attention of the locals.
A 50kg of local rice was sold for N20,500, while the foreign rice that was available in the country prior to the border shut was priced between N23,000 – N25,000. In this case, border closure helped Nigeria to focus its attention on growing a commodity within the country, instead of relying on imports. As always, there are two sides to a coin.
[READ ALSO: Nigeria confirms another three coronavirus cases)
The Nigerian employers may have to adopt a style of working from home for their employees especially within the thirty days to reduce possible local transmission.
Private Sector should also do the necessary to support government to shore up makeshift health facilities to the existing inadequate facilities currently available.
The issue of the coronavirus is a very shocking and life-changing moment for all of us across the globe, but we do our best to make sure everyone is safe. The government needs to take the necessary precautions and if that means complete border closure, then let it be done. A wise man once said, “Prevention is better than cure.”
READ MORE: COVID-19: Lagos asks civil servants to stay at home
For those in quarantine or self – isolation, my message is for you to make most of the time for what you never had time to do and remain optimistic.
Let us keep our spirits up and hope for the best in our world.
Paul Olele Jnr writes from Washington DC. He is a 2019 graduate of George Washington University and currently works as social media and research intern at the Corporate Council on Africa in Washington, D.C.
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.
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.
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).
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)
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.
CSL STOCKBROKERS LIMITED CSL Stockbrokers,
Member of the Nigerian Stock Exchange,
First City Plaza, 44 Marina,
PO Box 9117,
Lagos State,
NIGERIA.
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%.
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%.
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%
Get the Nairametrics News App
CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
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.
READ MORE: AfDB’s Akinwumi Adesina hits back, denies allegations against him
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.
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.
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.
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.
Get the Nairametrics News App
CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
President @Mbuhari is also seeking the House approval to borrow locally & internationally to finance capital projects as well as finance projects to support state governors in the 2020 budget
The letter was referred to the House Committee on loans & debt management. #HousePlenary— House of Reps NGR (@HouseNGR) May 28, 2020
Details shortly…
