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Financial Services

Key new forecasts for Nigerian banks as they navigate COVID-19 pandemic

Nigerian banks are expected to experience a slowdown in 2020 due to the COVID-19 pandemic.

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Banks' loans to customers

There is no gainsaying the fact that the Nigerian banking sector will experience a slowed-growth phase this year, due to the COVID-19 pandemic that has ravaged the economy. Several reports have been pointing to this sad reality, with the latest being Fitch Solutions’ Nigeria Banking & Financial Services Report for Q3 2020.

The 57-paged report made some very vital forecasts for Nigerian banks, one of them being that high inflation and increased government borrowing will be responsible for much of the headwinds to banks’ profitability in the medium term. In other words, even though these banks are expected to grow in the medium term, the rate of growth will be determined by the effects of inflation and government’s borrowing from the banks.

“Nigeria’s banking sector is set to grow over the medium and long term, with a slowing of growth in 2020, supported by new lending requirements which will help boost growth. However, we expect high inflation and government borrowing to provide strong headwinds to growth over the medium term,” part of the report said.

READ ALSO: Fitch rates 3 Nigerian banks lower to ‘B’, places others on negative watch

In the meantime, Fitch Solutions has revised its earlier 2020 growth forecast for Nigerian banks, including their total banking asset growth. The decision to change the earlier forecast was made out of consideration for the economic shortfalls caused by the pandemic.

Note that Nigeria’s adoption of the IFRS 9 accounting standards for bad loans had considerably helped to improve asset quality in the banking sector. As a matter of fact, the ratio of non-performing loans (particularly those in the oil and gas sector) had declined by as much as 40.7% between Q4 2018 and Q4 2019. Unfortunately, the pandemic and the dramatic fall in oil prices earlier this year, all combined to negate the recent recorded success. This is why banks’ asset quality is projected to deteriorate this year, according to Fitch Solutions. This will also make banks become more cautious about lending.

READ MORE: CBN to finance renewable energy initiatives, sets up N500 billion fund for manufacturers

“We continue to expect the changed minimum loan requirement to help drive client loan growth over the medium term. We have revised our growth forecast from the previous quarter and expect client loans to reach NGN14.9trn in 2020 with growth of 2.5% from 2019.

“Due to economic headwinds caused by the coronavirus pandemic, we have revised our forecast for total banking asset growth to 5.3% to NGN44.2trn. Over the medium term, we see average annual asset growth of 12.0% to NGN63.8trn by 2024.

READ ALSO: Fitch says Nigerian banks have a risk indicator of 12.14, explains why

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“Following the adoption of the IFRS 9 accounting standards for bad loans, including the transition that will protect banks’ capital adequacy ratios, asset quality in Nigeria has improved. Nigeria’s ratio of non-performing loans (NPLs) tied to the oil sector declined by 40.7% from Q418 to Q419 as oil exports rose by 16.1% in 2019. In turn, the total NPL ratio fell from 11.7% to 6.0% over this period. However, due to the combined economic impact of the Covid-19 pandemic and lower oil price, we expect asset quality to deteriorate this year, making banks more cautious about lending.”

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Below are the other key forecasts made by Fitch Solutions concerning the Nigerian banking sector:

  • At Fitch Solutions, we forecast a deceleration of client loan growth from 14.0% y-o-y in 2019 to 2.5% in 2020, before a small pickup to and 4.3% in 2021. Downside risks are elevated due to the Covid-19 pandemic and a weakened oil sector.
  • Demand for credit is set to weaken amid reduced economic activity and elevated uncertainty among consumers and businesses while deteriorating asset quality will make banks more cautious in issuing loans.
  • Increased government borrowing from domestic banks will help to support asset growth over the coming years. That said, there are risks of this crowding out private borrowers from receiving credit, hampering the economy’s long-term recovery.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Financial Services

AIICO refutes claims of non-remittance of pension assets to PTAD

AIICO says all pension assets due for remittance have been duly transferred to PTAD since the year 2017, in full compliance with the directive.

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AIICO Insurance Plc has refuted the allegations of non-remittance of pension assets to the Pension Transition Arrangement Directorate (PTAD).

This was contained in a statement issued by its Head, Strategic Marketing & Communications Department, Segun Olalandu on Friday.

It stated that all pension assets due for remittance have been duly transferred to PTAD since the year 2017, in full compliance with the directive.

AIICO added that both parties are presently engaged in a reconciliation exercise to conclude the process and it implored the public to disregard any information that may suggest otherwise as there is no basis to that effect.

It stated, “The attention of the Management of AIICO Insurance Plc. has been drawn to a recent report in the media on allegations of non-remittance of pension assets to the PTAD.

“AIICO Insurance Plc. hereby wishes to inform the public that all pension assets due for remittance have been duly transferred to PTAD since the year 2017, in full compliance with the directive. Both parties are presently engaged in a reconciliation exercise to conclude the process. We implore the public to disregard any information that may suggest otherwise as there are no basis to that effect.

“AIICO Insurance Plc. is and remains a responsible corporate citizen of Nigeria and ensures best practice in all its business activities and operations in line with extant laws and regulatory provisions guiding its practice.”

What you should know

The Senate Committee on Public Accounts had summoned NICON Insurance Plc, AIICO Insurance and other insurance companies over their reported failure to remit N17.4 billion Pension Fund to PTAD.

The Senate based its summon on the 2016 report of the Auditor General of the Federation (AuGF), which unravelled the non-remittance of N17.4 billion Pension Fund to PTAD.

The Auditor General’s report had said, “Returns on pension funds totalling N17.4 billion forwarded by the underwriters were not accompanied by the following documents: (i) (ii) (iii) (iv) Bank Certificate of balances as at the close of accounts.

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Accounting Statement showing the following: (a) (b) (c) Actuarial Value of Assets: Valuation of Assets at the lowest cost. Actuarial surplus: Excess of assets over Liabilities Actuarial Liabilities /deficiency: Excess of Liabilities over Assets A minimum of 3 years Annual Financial statements. Major Policy files and associated investment ledgers, if any.”

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Exclusives

How fraudsters fleece elderly Nigerians of their bank deposits

Fraudsters in connivance with some bankers are targeting mostly elderly customers to fleece them of their bank deposits.

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Protecting your money from fraudsters, Financial crisis is imminent in Nigeria -Dr. Segun Aina, Yahoo Yahoo

Mary Adegoke, 70, is a retired teacher and a depositor with one of the Nigerian Tier-1 banks. The mother of five got a rude shock on Friday, January 8, 2021, when she got a call from a stranger, who claimed to be her new account officer, requesting a One Time Password (OTP) that was sent to her phone a few minutes earlier.

Adegoke told Nairametrics that she wouldn’t have shared the information if the caller had not answered a few security questions like her account number, digits on her ATM card, and Date of Birth. She said, “I had no reason to doubt him after providing the answers. I never understood what he was up to and what the OTP meant and why he asked me to delete it immediately after I shared it with him. A few minutes later, I got a debit alert of N40,000, which was my pension for the month.

“At that point, I started sweating and knew I had fallen victim to fraudsters. But what I still don’t understand is how he got my account number and other personal details.”

READ: How scammers use SIM cards to rob your bank accounts

Mrs Abimbola Omole, 65, is another retiree and a victim of similar fraud. The retired civil servant is also a depositor with one of the Tier-1 banks, which has its headquarters in Marina, Lagos.

Omole had declined the offer of an ATM card through her account officer before travelling out of the country. The account officer had then proceeded to forge the customer’s signature to request the ATM card.

“I couldn’t believe my eyes when I got debit alerts that a sum of N150,000 was deducted from my account within three days,” a bewildered Omole reported. “When we traced the location of the withdrawal, we found it was in Onitsha. I am sure the banker must have disclosed my details to someone there because she had asked me to lend her money before I travelled,” she recalled.

Adegoke and Omole are only two of several bank depositors, especially elderly citizens, who have been fleeced by fraudsters masquerading as bank staff. These crimes are unmistakably and increasingly targeting a specific class of people – vulnerable elderly people.

READ: How thieves use Covid-19 to defraud bank accounts

Ex-bankers share their experiences

Sources across the top banks revealed that many bankers engage in various fraudulent activities as a result of laxity on the part of some officials in the internal control departments at various levels. Nairametrics found that many of these frauds were perpetrated by third parties in connivance with insiders, targeting mostly elderly customers within the 60-70 years age bracket, who may expectedly not be tech-savvy. This is usually done by requesting that the unsuspecting customers provide vital information such as their Personal Identification Number (PIN), which the fraudsters then use to debit their accounts.

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“We treat scores of fraud cases every year and most of them are done in connivance with senior officials of the bank at the branch level. Recently, a fraudster got the PIN of a customer and withdrew N100,000 from the account on a particular Sunday,” a banker who pleaded anonymity told Nairametrics.

A former Manager of one of the Tier-1 banks, in an exclusive interview with Nairametrics, disclosed that three of the staff of the bank in Sokoto were arrested by the Economic and Financial Crimes Commission (EFCC) in March 2020. The bankers were arrested for conspiring to steal the sum of N1.2 million from a customer’s account and were said to have done so by issuing an ATM card in the customer’s name to an impostor who then proceeded to clean out the account.

READ: CBN releases new guidelines for OFIs, orders inclusion of NUBAN code or face sanctions

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Although some of this money was later recovered by security agents, investigations reveal that the system is beset with several other unrepentant fraudsters still plying their craft at the expense of unsuspecting customers.

A banker with a Tier-2 bank also shared another case with Nairametrics, which was uncovered by EFCC. According to her, the anti-graft agency uncovered a criminal syndicate of bankers who specialized in forging signatures of deceased bank customers and stealing from their accounts. They also execute fraudulent financial transactions, including unauthorized debits of depositors’ funds.

The alleged members of this syndicate were in March, arraigned before a Judge of the State High Court in Uyo on a 23-count charge bordering on conspiracy, forgery, obtaining by false pretense and criminal conversion, depositors’ funds to the tune of over N37.6 million.

One of the accused persons was found by the EFCC to have used his position as the Head, Operations and Transaction Service and Delivery, to collude with third parties and establish the syndicate which specialized in perpetrating fraudulent transactions and deductions.

Further investigations also showed that without the authorization or knowledge of the management of the bank, the defendants managed a fictitious fixed deposit account with interest accruing to it.

READ: Personal data of 533 million Facebook users leaked on a hacking forum

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What they are saying

Head of Media, EFCC, Mr Wilson Uwujaren, disclosed that the anti-graft agency had prosecuted scores of bankers who had either swindled depositors or the banks in different cases.

He added that there were yet more cases pending in Federal High Courts in Port Harcourt, Rivers, Yenagoa, Bayelsa, Edo, and Lagos States, among others.

“What happens is that when a staff of the bank is involved in such activities, the bank takes the person out of the system through dismissal. But now, we are going after the banks and the personnel used to perpetrate fraud,” he said.

Banks must fine-tune their internal control processes to better protect their customers as their failure to do this would be costly.

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Increasing use of mobile

Mobile adoption in Nigeria has risen over the last half a decade as the Central Bank’s policies on financial inclusions have increased reliance on mobile phones as a tool for conducting banking activities.

According to the latest data from the NIBSS, Mobile transactions in Nigeria (mobile & USSD) surged by 82.6% in 2020 to stand at 1.69 billion compared to 928.86 million recorded in the previous year.

Banks also earned a whopping N216 billion from digital banking transaction, buttressing just how critical mobile is to shoring up bank revenues.

Despite this heavy reliance on mobile as a strategic tool for financial inclusion, fraudsters are also benefiting just like the banks.

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