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CBN expands scope of regional banks in Nigeria, gives compliance timeframe

The aim of this directive is to expand the reach of the regional banks across the country, the CBN said.

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Godwin Emefiele, CBN expands scope of regional banks in Nigeria, gives compliance timeframe

The Central Bank of Nigeria (CBN) has expanded the scope of regional banks in the country, by requiring them to open branches in at least one additional geopolitical zone outside of the existing geopolitical zones where their operating licenses cover.

A circular that was issued earlier this week by the apex bank said this new directive is in accordance with “section 8 (g) of the CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulations no [1] 2010 as revised on September 4, 2019.” 

The new directive took effect on Friday, June 26, 2020. In other words, all the regional banks are expected to have become aware of this development since then. They now have a timeframe of six months to establish their presence in the geopolitical zones outside of where they currently operate.

READ ALSO: Nigerian Banks expected to write off 12% of its loans in 2020 

It should be noted that prior to this time, regional banks in the country typically operated in at least two geopolitical zones of the federation. However, in line with the new expansion, the CBN shall now prescribe an additional geopolitical zone for each of these regional banks, thereby making the coverage area three geopolitical zones per regional bank.

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Meanwhile, the CBN said the aim of this directive is to expand the reach of the regional banks across the country, whilst ultimately promoting financial inclusion. Note also that the new directive affects all regional banks, both the ones engaged in commercial banking and non-interest banking. Some part of the circular said:

“Effective the date of this circular, all banks with regional authorisation shall be required to operate from one additional geopolitical zone as may be prescribed for each institution by the CBN, without prejudice to the existing requirement of the minimum of two (2) geopolitical zones of the federation. The essence is to promote spread and balance of the regional banks across the country.

“The compliance timeline to establish operational footprint at the advised zone shall not exceed six (6) months from the issuance of the regulatory advice to each regional bank by the CBN.”

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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

Conventional insurance firms can now set up their Microinsurance department – NAICOM

NAICOM has issued a circular allowing conventional insurance companies in Nigeria to exploit the huge opportunities in the Microinsurance window.

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NAICOM

The National Insurance Commission (NAICOM) has issued a circular (NAICOM/DPR/CIR/32/2020) allowing conventional insurance companies in Nigeria to exploit the huge opportunities in the Microinsurance window.

The circular was signed by Akah L M, Director (Policy & Regulations), and disclosed that the requirements for the conventional insurance firms to be granted approval for the window operation includes:

  • The insurer shall seek and obtain approval of the Commission to transact microinsurance business.
  • Board resolution approving the establishment of a microinsurance department.
  • Applicant shall apply for window microinsurance national operation licence.
  • The department shall be headed by an experienced Insurance Officer, not below the rank of an AGM.
  • The Insurance Officer must possess a minimum of 7 years post Associate of Chartered Insurance Institute of Nigeria qualification or a minimum of 10 years working experience in a technical department of an insurance institution.
  • Any window operator shall segregate the financial records of its microinsurance business from that of the conventional business.
  • Appropriate reinsurance arrangement shall be put in place.

(READ MORE: NAICOM gives insurance companies additional one year to recapitalise)

What this means

The microinsurance window presents a gold mine waiting to be tapped by the conventional insurance firms in Nigeria, helping them to achieve critical mass in the market.

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This would afford opportunities for those in informal sectors, as well as low-income people and households to enjoy insurance products and services that will protect them against unexpected events, that could threaten their livelihood and businesses.

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Financial Services

CBN introduces “Special Bills” as part of efforts to control money supply in the economy

The Central Bank of Nigeria has announced the introduction of a Special Bill with unique features.

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CBN Gov Godiwn Emefiele

Nigeria central bank has announced the introduction of what it calls the “Nigeria Special Bills” in what it claims is an effort to deepen the financial markets.

The apex bank also claims the instrument avails it with an additional liquidity management tool for Nigeria’s financial system.

In a disclosure, signed by the Director of Banking Supervision of CBN, Bello Hassan, and seen by Nairametrics, it said the Special Bills contained the following features

READ: CBN Governor alleges parallel market used for bribes and corruption

  1. It has a Tenor of 90 days
  2. It comes with Zero coupon, as the applicable yield at issuance will be determined by the CBN.
  3. The instrument will be tradable amongst banks, retail and institutional investors.
  4. The instrument shall not be accepted for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window.
  5. The instrument will qualify as liquid assets in the computation of liquidity ratio for deposit money banks.

The central bank, yanked off retail and instituional investors from accessing the highly lucrative Open Market Operations bills where yields were previously high. It is unclear if this bills will replace the OMO bills or is permamnent.

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READ: Frantic CBN allows diaspora remittances to be withdrawn in dollars and sold anywhere including black market

What this means: With the introduction of the new Special Bills, the CBN aims to securitize the excess Cash Reserve Requirement balances of local banks by offering them short-dated zero-coupon special bills.

  • Since May 2020, the central bank has sequestered over N6 trillion as part of its CRR debits of the accounts of deposit banks.
  • Nigeria’s central bank expects commercial banks to maintain a loan to deposit ratio of 65% and thus debits the accounts of commercial banks who do not meet this target for excess deposits.
  • According to Nairametrica analysts, this new bill provides the banks with an instrument which they can offer to investors in exchange for a return. For example, the banks can sell the “Special Bills” to investors who need fixed income instrument.

Why it matters: The claims the Special Bills is in line with the “CBN’s goal of ensuring optimal regulation of systemic liquidity and promoting efficient financial markets in support of economic recovery and sustained growth,” however Nairametrics undertands there could be more to this.

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However, Nairametrics believes pressure from the banks who have complained about the frequent debits may have resulted in this new Special Bills. In some of the earnings calls listened into by Nairametrics, banks have often cited the drop in their interest income and margins.

READ: Bankers’ Committee embarks on cybersecurity & fraud awareness initiative, launches Moni Sense campaign

What they are saying: A part of the recent CBN disclosure read thus: “The Central Bank of Nigeria (CBN) hereby announces the introduction of Special Bills as part of efforts to deepen the financial markets and avail the monetary authority with an additional liquidity management tool.”

What to expect: The CBN is expected to further clarify the issue and pricing of the recent instrument in coming days.

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Financial Services

Fidelity Bank MD/CEO purchases 5 million additional shares worth N12.97 million

The MD/CEO Designate of Fidelity Bank Nigeria Plc has purchased an additional five million units of the bank’s shares.

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Fidelity Bank M.D purchases 5 million additional shares worth N12.97 million

The Managing Director/CEO Designate of Fidelity Bank Nigeria Plc, Mrs. Nneka Onyeali-Ikpe has purchased an additional five million units of the bank’s shares totalling N12.97million.

This is according to a notification, signed by the bank’s Secretary, Mr. Ezinwa Unuigboje, and sent to the Nigerian Stock Exchange Market yesterday, as seen by Nairametrics.

What you should know

The breakdown of the disclosure showed that the transaction took place in five tranches with an average share price of N2.56.

  • First tranche: 260,190 units of the bank’s share were bought at N2.52 each, amounting to N655,678.8
  • Second tranche: 400,000 units of the bank’s share were bought at N2.55 each, amounting to N1.02million.
  • Third tranche: 130,000 units of the bank’s share were bought at N2.58 each, amounting to N335,400.
  • Fourth tranche: 2,870,000 units of the bank’s share were bought at N2.60, amounting to N7.46million.
  • Fifth tranche: 1,339,810 units of the bank’s share were bought at N2.56, amounting to N3.43million.

(READ MORE: Fidelity Bank slashes growth forecast, readies Eurobond coupon ahead of due date)

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In summary, the total transactions incurred by the MD in buying 5 million additional shares grossed N12.97million.

What this means

The recent corporate action indicates growing optimism in the bank’s future and potentials, which could be a pull factor to other investors.

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