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Business News

COMMENTARY: Moody’s changes outlook on Nigerian banking sector to negative

The outbreak of COVID-19 and the sharp downturn in crude oil prices have continued to stoke fears of a further devaluation in the Naira.

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Q1 2020, Disrupting Nigerian banks, Evolution of Nigerian banks in 59-years , GTB, UBA, Zenith, Access Banks’ salary advance loans, Can a company operate without a website in 2019? , Banks refund N3.09 billion to customers over claims on excess charges, fraud, others  , Bank CEOs applaud NCC’s decision to suspend USSD charges, GTBank, Zenith, Access, FBN, 10 others spend over N8 billion on CSR, Banking: Evolving trends in the bankers’ market, GTBank, Access, FBNH, Standard Chartered wrestle over women entrepreneurs , GTBank, Access Bank, Zenith, FBN, 16 others disburse CBN’s N610.4 billion to farmers , Credit to government declines, as Credit to private sector hits N25.8 trillion, Banking sector NPLs down, loans up, Non-Performing Loans in Agriculture, construction, others rose to N143.76 billion, Asset seizure: Banks begins recovery of N6.125 trillion borrowed to the oil sector, Customer Experience: GTB, FCMB, Citibank, others emerge best banks in 2019, Nigeria’s top 5 banks spent more than N40 billion on adverts in 2019, Nigerian banks face risky future over low oil prices, coronavirus, Testing the financial strength of Nigerian banks

According to news reports, Moody’s Investors Service had earlier this week changed its outlook for Nigeria’s banking system from stable to negative. Moody’s rating agency highlighted that the change reflects its view that banks will face weakening loan quality and foreign-currency liquidity challenges as depressed oil prices and the global pandemic weigh on Nigeria’s economy.

The outbreak of COVID-19 and the sharp downturn in crude oil prices, which have accelerated capital flow reversals, continue to stoke fears of a further devaluation in the Naira. We say further devaluation because the CBN had in March moved the official exchange rate from N307/US$1 to N360/US$1. At the Investors and Exporters Window (I & E), the CBN also adjusted the NGN peg upwards by 5.7%, as it raised its intervention rate to N380 from N366. Depressed oil prices and subsequent devaluation affect banks in a number of ways.

First is asset quality: A few sectors show more vulnerability to depressed oil prices and devaluation in the local currency and as such bank lending to these sectors will most likely show signs of strain. One of such sectors is the oil and gas upstream/midstream sector. In conversations with banks over the past few weeks, we understand that some banks like Guaranty Trust Bank have hedged their oil and gas exposure over several months while many others believe that it will be possible to restructure these loans – apparently with little effect on asset quality in the short term.

Second is capital erosion: Devaluation, in theory, challenges capital adequacy ratios (CAR) because the Naira-equivalent value of risk-weighted assets (RWA) rises as this includes foreign currency loans. However, the weight of foreign currency loans in RWAs is for the most part moderate (35%-45%), and some banks like FBNH and Guaranty Trust Bank will likely make windfall gains from net long FX positions which in turn boost capital. Some banks also have some of their Tier-2 capital in foreign currencies and will, therefore, see an increase in Tier-2 capital if a devaluation occurs.

(READ MORE: Nigerian banking stocks ignore red flags, boost Nigeria Stock Market)

However, the CBN rule which restricts Tier-2 capital to only 33.3% of Tier-1 capital implies that not all the increase would qualify for the total capital adequacy (Tier-1 plus Tier-2) computation. Overall, we see moderate erosion in CAR for our coverage banks.

Finally, foreign currency liquidity: Borrowings made by banks in US dollars are problematic under a devaluation scenario. As such, banks need to have to perform US dollar assets in order to receive dollars with which to service their own US dollar borrowings. The greater the under performance of US dollar assets in cash terms (for example, re-scheduled US dollar loans to the oil & gas sector, with grace periods during which banks do not receive cash) the higher the likelihood that banks will have to find other sources of US dollars to service their own USD denominated borrowings. An extreme case is when a bank decides to purchase US dollars with Naira at unfavorable rates in order to service a US dollar obligation. We assume however that many banks have access to the supranational lenders, and to development banks for refinancing, which should limit the possibility of occurrence of the extreme scenario.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission.

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Business News

FG to distribute 10 million LPG gas cylinders in 1 year

The FG is set to inject up to 10 million gas cylinders into the market to help improve safety and deepen cooking gas utilization.

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The Federal Government has announced plans to inject 5 to 10 million Liquefied Petroleum Gas (LPG) cylinders into the market in the next one year.

This is to help improve safety and deepen LPG (otherwise known as cooking gas) utilization across the country.

This disclosure was made by the Programme Manager, National LPG Expansion Implementation Plan, Mr Dayo Adeshina, at a sensitisation workshop on LPG Adoption and Implementation for Industry Stakeholders, on Wednesday in Lagos.

According to a report from the News Agency of Nigeria (NAN), Adeshina said the National LPG Expansion Implementation Plan, domiciled in the Office of the Vice President, was committed to achieving Nigeria’s target of 5 million Metric Tonnes of LPG consumption annually by 2027.

What the Programme Manager for LPG Expansion Implementation Plan is saying

Adeshina said, “The Federal Government is working towards injecting five to 10 million cooking gas cylinders into the market within the next one year. We are starting the cylinder injection under the first phase in 11 pilot states and FCT, with two states from each of the geopolitical zones.

The states are Lagos, Ogun, Bauchi, Gombe, Katsina, Sokoto, Delta, Bayelsa, Ebonyi, Enugu, Niger and the Federal Capital Territory. The cylinders will be injected through the marketers. The marketers will be responsible for the cylinders and the exchange will take place in homes and not in filling stations.

What this means is that going forward, cylinders will not be owned by individuals but by the marketers who will ensure that they are safe for usage.’

Adeshina pointed out that apart from household consumption, the government was trying to increase LPG usage in agriculture, transportation and manufacturing adding that this will enable the country to reduce CO2 emission by about 20% and create millions of jobs for Nigerians.

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He said that the government had also granted waivers on importation of LPG equipment and removed Value Added Tax (VAT) on LPG in addition to investment in infrastructure.

The President of the Nigerian Liquefied Petroleum Gas Association, Mr Nuhu Yakubu, said efforts should be made to ensure the availability, accessibility and affordability of cooking gas in the country adding that this would encourage more Nigerians to embrace gas usage in their homes with the attendant benefits to the country.

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Mr Olalere Odusote, Lagos State Commissioner for Energy and Mineral Resources, said the population of Lagos makes it imperative for residents to adopt cleaner energy sources for cooking, transportation and power generation adding that the government was targeting the conversion of 45% of about 4 million vehicles in the state to autogas over a four-year period in partnership with marketers.

What you should know

  • It can be recalled that the Federal Government had in November 2020, announced plans for the conversion of cars to autogas in a bid to have cheaper and cleaner energy especially with the high cost of petrol.
  • The government at different levels are pursuing cleaner energy sources for cooking, transportation and power generation.

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Business

JAMB bans use of email by candidates for UTME, DE registration

JAMB has announced that candidates for the UTME and Direct Entry will no longer be required to provide their email addresses at the point of registration.

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The Joint Admission and Matriculation Board (JAMB) has announced that candidates for the Unified Tertiary Matriculation Examination (UTME) and Direct Entry will no longer be required to provide their email addresses at the point of registration.

The new adjustment is to protect candidates from various forms of manipulation and distortion of their personal details by some fraudulent cyber café operators.

The Registrar of JAMB, Prof. Is-haq Oloyede, who made the disclosure while addressing newsmen at the board’s headquarters on Wednesday in Bwari, Abuja, said the change, would take effect from Thursday, April 15, 2021.

What the JAMB Registrar is saying

Oloyede said, “They gain access to profiles of these candidates under the pretense of creating an email address for them. Then they change and block the candidates from receiving messages from the board. They also extort them after they change their passwords.

In view of this, the board has come up with adjustments to our operations. The first decision is that beginning from Thursday, April 15, candidates would no longer be required to provide any email address during registration from this year onwards.

It is by going to these cyber cafes to open emails that these candidates are open to abuse and stealing of their personal data,’’ he said.

He said that the board now had a mobile app that would allow candidates to deal directly with the board with their smartphones or via SMS to ‘55019’ code option.

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The code option, he explained, would allow candidates to check admission status as well as all other verifications via SMS.

He said, “Printing of examination slips, results notification or raising tickets can be done anywhere by using candidates’ registration number only. However, at the close of registration every year, we would need the email addresses of the candidates so we can have access to as many of them as possible.

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At the conclusion of registration, candidates are expected to send their email addresses through the mobile app or text message to the 55019 code twice, for validation. This is to update their profile with JAMB as the email will no longer be used as access to their profile, but rather as a communication tool with candidates.’

While advising candidates to guard their phones with utmost care as it was the weapon for all transactions, Oloyede said that henceforth, all JAMB owned Computer-Based Tests (CBT) centres across the country, would only allow candidates with ATM cards into its centres.

He said that in order to cut down on the activities of fraudsters who hijack candidates to extort money from them, the centres would no longer allow candidates go outside the centres to pay for their e-pins and other cash transactions.

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The JAMB Registrar said, “Only candidates with ATM cards will be allowed into all JAMB owned CBT centres, it can be that of their parents as long as they have the pin for the transaction.

“Those without ATM cards can go to other privately owned CBT centres where they can pay cash to register but we will not take cash or transact outside our centres.’’

What you should know

Meanwhile, in a related development, JAMB had said that the board lost over N10 million in 2020 to activities of fraudsters who penetrated their payment portal for ad-hoc staff.

The JAMB Registrar said that the money, which was meant to pay JAMB ad-hoc staff from the 2020 Unified Tertiary Matriculation Examination (UTME), was hijacked by the suspected fraudsters.

JAMB had a few days ago confirmed the commencement of registration for the 2021 UTME/DE examinations after the initial hiccup.

It stated that applicants must provide NIN at the point of registration with the registration by Direct Entry candidates to run concurrently with that of UTME candidates.

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