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Updated: CBN debits banks N1.4 trillion for failing to meet CRR targets.

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CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited

The Central Bank of Nigeria has debited commercial banks in Nigeria a whopping sum of N1.4 trillion for failing to meet Cash Reserve Requirement (CRR) targets. Nairametrics reliably obtained this information from sources within the sector and has a copy of the list of banks that have been debited. The Central Bank also published some of this data in some Newspapers today.

The cash reserve requirement is the minimum amount banks are expected to retain with the CBN from customer deposits.

From the list of debits suffered by banks, Zenith Bank ranked the highest with about N355.9 billion while FBNH and UBA came second and third with N208 billion and N204 billion respectively. Here is the list of debits

  • Zenith Bank: N355.9 billion
  • UBA: N204.7 billion
  • First Bank: N206.1 billion
  • Stanbic IBTC: N143.9 billion
  • Standard Chartered: N120.6 billion

READ ALSO: Polaris Bank to wave penalties on loan defaults due to Covid-19

See image below for the others

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Why CRR: In January 2020, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) raised the Cash Reserve Ratio by 5% to 27.5%. The move shocked bankers who had expected the CBN to taper down on its tight monetary policies considering the economic headwinds. This was very well before the COVID-19 virus exploded worldwide.

The CBN had attributed the reason for the increase to raise the CRR is informed by recent inflationary pressure in the economy. Also, the CBN Governor stated that the decision to hold other rates was informed by the conviction of the committee members that there is a need to observe the response of the economy to several policies introduced by the Central Bank.

In the communique released by the CBN, the MPC stated that the persistent increase in the inflation rate, which stood at 11.98% in December 2019 is a source of concern. Hence, the committee disclosed that inflation above 12% is inimical to output growth in the Nigerian economy.

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The CBN also imposed a loan to deposit ratio of 65% which means banks will also have to lend out 65% of their deposits. This is in line with the APEX banks push to get banks to lend more to the private sector, rather than invest in treasury bills and other financial derivative products that haven’t actually materialized in lending to critical sectors to the business.

READ MORE: Fire outbreak at CBN office in Jos

Banks Outcry: Banks have however complained bitterly that the CRR policy especially as it has affected their Net Interest Income. CRR involves reducing the amount of money available to banks to lend further reducing their profitability. By debiting banks for failing to meet CRR targets, the CBN is effectively denying banks of the ability to earn an income in customer deposits.

Banks have also resorted to reducing its deposit drive to avoid further CRR penalties. However, banks overall deposits increased from N22 trillion in 2018 to N24.4 trillion as at December 2019. But deposit rates stagnated in the last quarter of the year growing from N23.1 trillion to N24.4 trillion. Deposits are divided into Demand Deposits at N7.1 trillion and Time, Savings and Foreign Currency Deposits of N17.3 trillion.

Most tier 2 banks also cut their dividend payment in response to a raft of hawkish policy moves to from the CBN. By cutting dividends, banks are effectively keeping some of their cash in anticipation of possible sterilization of their funds. Bank deposit with the CBN was about N6.4 trillion in December 2019 out of which reserve requirements was N5.6 trillion. Cash Reserves Requirements with the CBN was just N4.8 trillion as of September 2019.

Why is the CBN doing this? An analyst who spoke to Nairametrics on condition of anonymity remarked that this was an ugly development.

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“Nobody knows what CBN truly using them for (the CRR)…but suspicion is they are leveraging to finance govt. It is really a terrible idea but then the CBN is doing a lot of development activities that are terrible ideas….e.g. rice farming, loans at 9% for entertainment sector etc. So they’ll argue all those development projects got to be paid for somehow” he remarked

Another analyst who also prefered to remain anonymous as he has not been authorized to comment, believes the banks are faced with a double whammy hence the debits.

“The CBN expects banks to hit 65% loan to deposit ration and when they don’t the bank takes a 50% CRR charge on the differential.”

For example, if a bank as a is at 60% LDR instead of 65%, the central bank will debit the banks 50% of the 5% differential as part of its CRR charge. This could be the reason behind this.

The analysis also opines this could be a move by the CBN to “block banks from going into the FX market” to make money from speculation on the exchange rate once the Covid-19 situation is over. 

 

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Energy

New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC

The Minister has clarified that the new PIB seeks to commercialize the NNPC rather than scrap it.

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autogas, FG to establish petroleum depot, oil and gas logistic centre in Akwa Ibom

The long-awaited new Petroleum Industry Bill (PIB), which was just submitted by President Muhammadu Buhari to the National Assembly, has taken steps to amend changes to deep water royalties made last year.

This is as the Minister of State for Petroleum Resources, Timipre Sylva, has clarified that the new PIB seeks to commercialize the Nigerian National Petroleum Corporation (NNPC) rather than scrap it.

According to Reuters, while confirming the receipt of the bill from the President, the Senate President, Ahmed Lawan, said that it would be officially presented on the floor of the 2 chambers of the National Assembly on Tuesday and would get quick consideration.

In addition to the earlier reported creation of a new company, Nigerian National Petroleum Company Limited, to take over the assets and liabilities of NNPC and the establishment of some new regulatory bodies, a section of the bill proposes an amendment to controversial changes to deep offshore royalties made late last year. This involves reducing the royalty that oil companies pay the Federal Government for offshore fields producing less than 15,000 barrels per day from 10% to 7.5%.

It would change a price-based royalty too so that it kicked in when oil prices climbed above $50 per barrel, rather than the initial $35.

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It would also codify in law that companies cannot deduct gas flaring penalties from taxes, a practice that was the subject of a court case.

Sylva made the disclosure during an interaction with journalists at the National Assembly complex after an interactive session with the leadership of the assembly.

Sylva said, “We have heard so much noise about NNPC being scrapped but that is not being envisaged by the bill at all. NNPC will not be scrapped but commercialized in line with deregulation move being made across all the streams in the sector comprising of upstream, downstream and midstream. We have said that NNPC will be commercialized.

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“But if you are talking about transforming the industry, the only new thing that we are introducing is the development of the midstream, that is the pipeline sector. So we have provided robustly for the growth of the midstream sector. Through commercialization, the required competitiveness in the sector will be achieved.

Sylva also pointed out that the host communities would have the best deal from the bill.

Nairametrics had earlier reported the scrapping of the Petroleum Product Pricing Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF) in the proposed new bill, in addition to the creation of a new entity, NNPC Ltd.

The Federal Government is expected to pay cash for shares of the company, which would operate as a commercial entity without access to state funds.

The changes could make it easier for the struggling company to raise funds. However, the bill does not require the government to sell shares in the company and, unlike previous reform proposals, does not set a deadline for privatization to be completed.

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Tech News

Software bug brings down Microsoft Teams, Azure

Microsoft’s Teams app recently experience a bit of a glitch that affected services globally.

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Microsoft plans to train 25 million workers for free in 2020

Microsoft recently disclosed that it was investigating an outage that brought down its cloud-based office services, including the meetings software, Teams, worldwide.

Microsoft reported challenges with authentication for its cloud services at around 9.25 pm UTC, meaning people were having issues logging into the online services; Teams, Outlook, and Office. The outage had affected services globally.

In a series of tweets sent by the world’s most valuable software maker and seen by Nairametrics, the company said:

“We’re investigating an issue affecting access to multiple Microsoft 365 services. We’re working to identify the full impact and will provide more information shortly.

“We’ve published MO222965 to the Microsoft 365 Admin Dashboard, and will also be updating http://status.office.com with updates to our investigation.

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“We’ve identified a recent change that appears to be the source of the issue. We’re rolling back the change to mitigate the impact. Please follow http://status.office.com for updates on this issue if you are unable to access the admin portal.”

Why it’s important: In the midst of the COVID-19 pandemic, value chain services like Teams have been critical for individuals, and businesses working remotely.

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In the month of April, Microsoft reported 75 million daily active users on Teams as a result of more people working from home.

With so many users depending on its services, Microsoft cannot afford to have any downtime. However, it reported that the services were mostly restored, though a small subset of customers in North America and the Asia Pacific were still unable to access them.

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Coronavirus

COVID-19 Update in Nigeria

On the 28th of September 2020, 136 new confirmed cases and 3 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,460 confirmed cases.

On the 28th of September 2020, 136 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 1,450 samples across the country.

To date, 58,460 cases have been confirmed, 49,895 cases have been discharged and 1,111 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 507,006  tests have been carried out as of September 28th, 2020 compared to 505,556 tests a day earlier.

COVID-19 Case Updates- 28th September 2020,

  • Total Number of Cases – 58,460
  • Total Number Discharged – 49,895
  • Total Deaths – 1,111
  • Total Tests Carried out – 507,006

According to the NCDC, the 136 new cases were reported from 13 states- Lagos (71), Rivers (23), Plateau (12), Adamawa (6), Oyo (6), Kaduna (5), Abia (3), FCT (3), Katsina (2), Kwara (2), Bauchi (1), Borno (1), Edo (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,310, followed by Abuja (5,677), Plateau (3,400), Oyo (3,260), Edo (2,625), Kaduna (2,402), Rivers (2,370), Ogun (1,836), Delta (1,802), Kano (1,737), Ondo (1,631), Enugu (1,289), Ebonyi (1,040), Kwara (1,034), Abia (894), Gombe (864). Katsina (859), Osun (827),  Borno (742), and Bauchi (699).

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Imo State has recorded 568 cases, Benue (481), Nasarawa (449), Bayelsa (398),  Jigawa (325), Ekiti (321), Akwa Ibom (288), Niger (259), Adamawa (240), Anambra (237), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (76), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

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