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FG slashes 2020 budget by N318 billion, sends to NASS

The Federal Government has slashed the 2020 budget by N318 billion and sent to the National Assembly.

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FG slashes 2020 budget by N318 billion, sends to NASS

The Federal Government has slashed the 2020 budget by N318 billion and sent it to the National Assembly. The government reduced the estimate from N10.594 trillion to N10.276 trillion.

The President Muhammadu Buhari led-administration also reduced the oil bench mark from $57 per barrel to $30 per barrel, as the oil production volume was dropped from 2.17 million barrel to 1.70 million barrel. The exchange rate was increased from N305 to N360 per dollar.

Reports also have it that capital projects across ministries, departments and agencies was reduced by 20% and pegged at N312.82 billion.

Meanwhile, the leadership of the National Assembly, Minister of Finance, Zainab Ahmed, and the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, had met today.

READ MORE: Senate tells FG to sell 40% stakes in DisCos to foreign investors

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Shortly after the meeting, the Senate President, Ahmad Lawan took to his Twitter handle narating what happened at the closed door meeting.

He explained that the National Assembly leadership was presented with all the facts regarding the the current situation on Nigeria’s crude oil and the amendment being contemplated as regards the MTEF and 2020 budget.

Lawan said, “At the heart of all these facts is the various intervention initiatives of the Federal Government to mitigate the impact of the Coronavirus pandemic on Nigeria.

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“I told the presidential committee at the meeting to ensure equity and fairness in the distribution of the stimulus package and to ensure also that all parts of the country is considered in the intervention initiatives.

“We must ensure that there is equity. That there is fairness in the interventions. Every part of this country should have something to ameliorate the situation whether it is Coronavirus infected or not.

READ MORE: BIG TROUBLE: CBN’s N650 billion ‘crisis’ explained

The Senate President also tasked the relevant agencies of government to ensure that they streamline their activities along the provisions in the 2020 budge and to avoid needless duplication of projects.

He explained that the Minister of Finance, Budget and National Planning indicated very clearly that the Executive is proposing a N500 billion stimulus package. While this is a very good proposal, he added that it must not duplicate what is already in the 2020 budget.

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“So there is the need for the Federal Ministry of Finance and the CBN to have their intervention streamlined in such a manner that what someone loses under the stimulus package of the Federal Ministry of Finance, he gains in the stimulus package of the CBN.

“We must ensure that these Interventions have very clear and definite measurable targets. We shouldn’t just throw money out there and then we don’t see anything because the National Assembly will ensure that it monitors every single Kobo if and when the proposal is endorsed,” he added.

 

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Financial Services

How foreign exchange risks and others affect the Nigerian pension industry 

A report has analysed risks militating against the Pension industry in Nigeria.

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This is why you should make voluntary contributions to your pension fund

Despite being one of the fastest-growing sectors in the Nigerian financial services industry, the Nigerian pension industry has been affected by various riskssuch as the volatility in the foreign exchange and other factors.

However, these risks have harsh consequences on the retirement income of contributors. For example, in Nigeria, whilst the pension assets in the last decade have grown by 21% annually, the growth in the value of assets when converted to USDhas been about 11% over the same period. 

READ: PenCom recovers N17.51billion from defaulting employers, imposes penalties

This is according to a recent report released on Pension Sector Forum by ARM Pension, with the theme “Pension Assets Risk Management in the Face of Uncertainties 

All other things being equal, the findings revealed that the Defined Contribution Pension scheme assets on a 10- year time frame, grew faster than Defined Benefits (CAGR 8.4% pa vs 4.8% pa). Increased member coverage and higher contributions were probable factors responsible for the growth In addition, most retirees might not have enough funds to maintain a decent standard of living, as retirement risk has been transferred to them. 

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Other risks outlined in the summit includeinterest rate risk, political risk, operation risk, and key macroeconomic risks such as unemployment, GDP, inflation, currency among others. 

READ: Is Zenith Bank thriving on the strength of sound financial indices?

With regards to who bears the retirement risk, 68% of the risk is borne from one’s sources, while 38% is from outside sources. 

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The report also stated that the total pension contributions received in the industry from 2017- 2019, was almost equally split between the private and public sectors at the end of Q3 2019 

Explore Economic and Financial Data on the Nairametrics Research Website

Way Forward 

In mitigating the risks inherent in the Nigerian pension industry, experts at the summit called for increased collaboration among stakeholders, engagement with all regulators, increased advocacy for corporate governance, increased awareness, and sensitization of contributors by stakeholders among others as viable options going forward. 

Key Highlights  

  • As of June 2020, only 11.3% of the Nigerian labour force had opened retirement savings accounts (RSAs), while pension assets stand at less than 10% of GDP. 
  • The total number of funds under management currently stands at N11.1 trillion. 
  • There are currently over 9.04 million subscribers and 32 operators. 

READ: Why May was bad for your Pension funds

To view the report, click to download HERE

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Financial Services

Nigerian fintech companies raised $600 million in five years – McKinsey Report 

McKinsey report has revealed that Nigeria’s fintech companies have raised over $600 million in funding in the last six years.

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fintechs, commercial banks, Events in FinTech industry in 2019, Nigeria's fintech industry 2020: The growth frontier of the new decade

In a space of five years, Nigeria’s fintech companies have raised over $600 million in funding, attracting 25($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million.  The period under review is 2014- 2019. 

This information is contained in a recently published report by McKinsey titled Harnessing Nigeria’s Fintech Potential.” The report highlighted the combination of youthful demographic, increasing smartphone penetration, and concerted efforts to driving financial inclusion as factors that interplay to produce conducive and thriving enabler or platform for the fintech firms in Nigeria. 

READ: BOOM: CBN issues new circular that could force banks to lend to nearly everyone.

The report outlined some of the feedback against fintech companies ranging from poor user experience, underwhelming value-added from using some of the financial products, low returns on savings, and limited access to investment opportunities. 

The report also showed that Nigerian fintech companies are primarily focused on payments and consumer lendinghaving allotted an aggregate of 39% on payments to consumers, SMEs, and corporate FSP, and an additional 25% to consumer lending. The breakdown is depicted below. 

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READ: This is where PSB, CBN got it all wrong

Source: McKinsey report, 2020. 

READ: Banks Vs Fintechs – Who should be Afraid? (Part Two)

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On the driving factors behind the increasing choice of payment and consumer lending as an area of concentration by fintech companies, a part of the report read thus; 

The factors driving growth in each of these segments vary. Payment-focused solutions have surged over the past two years, spurred in part, by the central bank’s financial inclusion drive and favorable regulatory policies, including revised Know Your Customer (KYC) requirements for lower-tier accounts and incentives, to accelerate development of agent networks across the country. PagaOPayCellulant, and Interswitch’s QuickTeller compete with mobile banking applications and bank unstructured supplementary service data (USSD) channels to send and receive transactions and bill payments. 

READ: PenCom recovers N17.51billion from defaulting employers, imposes penalties

Fintech activity in lending is picking up, thanks to the fact that fintechs are able to leverage payment data to determine lending risk more easily, and utilize smartphones as a distribution channel. For example, fintech startups such as Carbon and Renmoney have successfully leveraged alternative credit-scoring algorithms, to provide instant, unsecured, short-term loans to individuals. A few fintechs, such as Migo, have also stepped up to offer unsecured working-capital loans to SMEs with minimal documentation. Banking fintech solutions have been fast followers here, with leading banks launching digital lending platforms like Quick Credit by GTBank and Quickbucks by Access Bank. 

In general, access, convenience, and trust have all played key roles in the increasing use of fintech products. For example, in the last six months, 54% of consumers have reported increased usage of their fintech products 

READ: Key ‘side-hustles’ Nigerian Bankers supplement their income with

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Why this matters 

In line with the National Financial Inclusion goals of 2020, and owing to the fact that despite the remarkable progress recorded by traditional banking institutions, the vast majority of consumers are underserved.  Hence, the issue of accessibility especially in remote areas, affordability, and user experience have been a front-burner issue. 

The aforementioned issues have created an opening that fintechs have been quick to take advantage of, providing enhanced propositions across the value chain, to address major points in affordable payments, quick loans, and flexible savings and investments among others. 

READ: CBN grants licenses to 3 Payment Service Banks

Conclusion 

Fintech accounted for only 1.25of retail banking revenues in 2019, signaling a room for development. Despite recording a growth of fintech investments in Nigeria to the tune of approximately $460 million in 2019, majority of these investments were from external investors. This was only a small fraction (1.27%) of the $36 billion invested in fintech globally. 

READNew report details how Nigerian fintech companies are expanding their business scopes

The report opined that full optimization of fintech companies in Nigeria can stimulate economic activity, by creating a multiplier effect, and can drive progress towards development goals. Economic impact will primarily come from expanding revenue pools and attracting foreign direct investment to the country. The sector can unlock a plethora of economic benefits by driving increased fintech productivity, capital, and labour hours through digitization of financial services.  

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Business

PenCom recovers N17.51billion from defaulting employers, imposes penalties

N17.51 billion was recovered by PenCom from employers who refused to remit pensions from workers’salaries

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Nigeria’s Pension Asset increased by N228 billion in October, PFAs increase investment in infrastructure to N40.52 billion   

The National Pension Commission has recovered N17.51 billion from employers that refused to remit deducted monthly pensions from their workers’ salaries to their Retirement Savings Accounts with the respective Pension Fund Administrators.

This was disclosed by the Commission in its 2020 second quarter report which was released on Friday.

Out of the N17.51 billion, the principal contribution was N8.89 billion, while the penalty imposed on the employers was N8.63 billion.

READ: CBN says 22 banks to restructure over 35,000 loans due to COVID-19

The report read, “Following the issuance of demand notices to some defaulting employers whose outstanding pension contribution liabilities had been established by the recovery agents, 16 of the affected employers remitted the sum of N261.33 million representing principal contribution of N152.79million and penalty of N108.54million during the quarter. This brought the total recoveries made from inception as at June 30, 2020 to N17.51billion.”

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According to the report, one batch of NSITF lump sum payment application totalling N225,442.72 was however received on behalf of five NSITF members during the quarter.

READ: Ngige accuses NSITF management of embezzling N48 billion and awarding fake contracts

It said the application was processed and five members’ contributions were transferred to their bank accounts.

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Consequently, it added, the cumulative sum of N2.94billion had been paid into the bank accounts of 36,551 NSITF contributors as lump sum/one off payment from inception to June 30.

For the quarter ended June 30, the commission said it processed monthly pension payments totalling N62.25million in respect of 3,629 NSITF pensioners.

READ: Private Sector drives industry growth, as PenCom remits N7.4bn into RSA

As of June 30, it said the total pension payment to NSITF pensioners amounted to N4.73billion.

The commission added that it reviewed the request for the payment of attributable income to eligible NSITF members and granted a “no objection” for payment of N2.92billion to 165,954 eligible NSITF members whose NSITF contributions were refunded to their RSAs or bank accounts as of December 2018.

READ: Leaked memo: CBN instructs banks to block bank account of 38 companies for “forex abuse”

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