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Financial Services

NEXIM Bank issues rebuttal following explosive N50 billion fraud allegation

NEXIM Bank was established in 1991 and is devoted to diversifying Nigeria’s non-oil export base.

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Nexim Bank

Following numerous claims accusing Abba Bello, the Managing Director of Nigerian Export-Import Bank (NEXIM Bank) of diverting the whopping sum of N50 billion, the organisation finally issued a rebuttal yesterday in an attempt to clear its name.

A detailed statement that was signed by NEXIM Bank’s Corporate Communications Department described the accusations as false. The statement also noted that ‘a faceless organisation’ known as Citizens Committee for Corruption Free Nigeria (CCCN) had been the one behind the fraud claims.

The statement further noted that Nexim Bank initially ignored the accusations, but felt the need to respond after those leveling accusations against the organisation showed no sign of stopping.

READ MORE: NEXIM Bank set to disburse ₦25bn loan to non-oil exporters

The intrigues: In an obvious attempt to absolve the Abba Bello-led management of these fraud allegations, the statement had attacked NEXIM Bank’s immediate past management team. The erstwhile management was dissolved in 2017 by President Muhammadu Buhari due to gross incompetence. Apparently, Abba Bello was brought on board to help rescue Nexim Bank from its huge non-performing loan problem which was worsened by what the statement described as “reckless abuse of process” which led to insider related loans and an absolute breakdown of professionalism in bank’s loan administration processes.

The statement then praised Bello for successfully re-tooling NEXIM Bank and bringing it back from the brink of failure within the 3-year period he had been in charge. The statement also noted that NEXIM Bank reported profits of N2.03 billion and N1.09 billion in full-year 2019 and 2018 respectively, as against losses of N569 million and N8.03 billion in 2017 and 2016, respectively.

“We have noted recent incessant attacks on the Nigerian Export-Import Bank (NEXIM Bank) and its management in a section of the media, predominantly the social media. Most recently, a report has been trending on the social media claiming that a petition has been forwarded to the Economic and Financial Crimes Commission (EFCC), calling for a probe of the Managing Director/Chief Executive of Nexim Bank, Mr Abba Bello, over alleged corruption and mismanagement of the N50 billion Rediscounting and Refinancing Facility (RRF), provided by the Federal Government…

READ MORE: Buhari orders probe of past administrations over $9 billion U.K judgment

Sigma Pensions

“The current management of the bank, led by Mr Abba Bello, resumed office in April 2017 to replace the erstwhile government, which was removed by President Muhammadu Buhari, GCFR, over issues relating to gross incompetence, which had made the bank almost insolvent, with huge non-performing loans, exacerbated by reckless abuse of process, insider related loans and lack of professionalism in loans administration, amongst other issues,” some parts of the statement said.

More details: Citizens Committee for Corruption Free Nigeria (CCCN) had started a petition with the Economic and Financial Crimes Commission (EFCC), calling for Bello’s probe over the alleged diversion of N50 billion from Nexim Bank’s coffers. Specifically, the petition had accused Abba Bello of diverting and mismanaging the N50 billion Rediscounting and Refinancing Facility which was availed by the Federal Government to assist commercial and merchant banks to provide short-term finance in support of exports.

NEXIM Bank also clarified on the N50 billion Rediscounting and Refinancing Facility, noting that the money has been used to fund about 60 projects since it was released by the Federal Government in 2018. The bank said the track records of the fund’s beneficiaries are verifiable, and that the loans were adequately secured.

Note that NEXIM Bank was established in 1991 and is devoted to diversifying Nigeria’s non-oil export base through the provision of adequate financing.

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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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Business News

Access Bank spends N18.7 billion on digitization in 2020

Access Bank topped its spending on digitalization to enable it compete.

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Access Bank Plc, Nigeria's Creative Industry needs urgent financing from commercial banks to bridge unemployment gaps - Herbert Wigwe

Nigeria’s largest bank by assets, Access Bank revealed it spent a whopping N18.7 billion in IT and E-Business related initiatives in 2020. The figure is nearly double (92% higher) the N9.7 billion spent in 2019. The same expense line cost it N11.39 billion in 2018.

The bank claims the expenses is in line with its “investments in IT capability with the focus of improving customer experience and to support digitization,” a strategy the bank believes will help it to compete better.

Access Bank reported a spike in revenue from its digital channels posting a revenue of N56.1 billion, a 58% increase from a year earlier. Income from digital channels were N36 billion and N14.2 billion in 2019 and 2018 respectively.

This year, the bank also invested about N10.2 billion on intangible assets out of which N8.49 billion went into purchasing software. Banks also rely heavily on software applications to service their customers and drive operations.

READ: Jobs at risk as digitalisation takes its toll on Standard Chartered expansion plans

Commercial banks in Nigeria have invested heavily in expanding their digital products amidst an onslaught of competition from FinTechs who are innovating faster and cutting into market share. However, big banks like Access Bank have the financial muscle to compete in this space as buttressed by Access Bank’s spending.

For banks like Access Bank, the focus is to drive financial inclusion and retail customer acquisition through channels such as USSD, Mobile Banking, TelCos and other forms of digital platforms. Access Bank claims these moves have yielded benefits as it recorded improvement across its financial inclusion initiatives.

Access Bank claims its total digital transaction value rose to N33.89 trillion in 2020 made up of 1.6 trillion transaction counts. It also opened 3.6 million new accounts via its Telco partnerships and that it now has 40 million customers out of which 17 million are mobile users (USSD & Mobile).

Sigma Pensions

READ: USSD service disruption: MTN to use Flutterwave, Opay, Kuda, other payment channels

As the bank explains “our Retail Banking business has grown consistently across all income lines, driven by strong focus on consumer lending, payments and remittances, digitization of customer journeys, and customer acquisition at scale.”

The bank also claims it created 4 million digital loans in the year and it disbursed N105 billion in loans via its digital lending platform generating a 48% year on year growth. It generated N5 billion in revenue from digital lending a 49% growth year on year.

Access Bank is included in our Stock Select Recommendation Portfolio. Find out what our preferred entry and exit price is and what to look out for should you decide to own this stock.

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Business News

CBN debits banks N8.3 trillion as CRR in 2020

The Central Bank debited banks a whopping N8.3 trillion as CRR provisions in 2020 up 58% YoY.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, 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, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

Commercial banks in Nigeria suffered CRR debits of N8.3 trillion in the financial year ended December 2020. This represents a 59% increase from the N5.2 trillion debited in 2019.

 

Nairametrics confirmed this data from the financial statements of all commercial banks listed on the Nigerian Stock Exchange and excludes banks not listed, suggesting the amount could be closer to N9 trillion. Nigeria’s largest banks “FUGAZ” suffered the most debits with about N5.9 trillion in debits in 2020, over 70% of the total debits. Except for Unity Bank, all the banks have released their full-year earnings for 2020. 

READ: Analysis: GTB is minting profits but CBN is squeezing its cash

CRR Debits deducted from commercial bank deposits in 2020.
Source: Nairalytics Research.

Private-sector lending rises

The CRR is an abbreviation for Cash Reserve Ratio and is a monetary policy tool used by the Central Bank of Nigeria to control money supply in the economy. The central bank increased the CRR from 22.5% to 27.5% in January 2020 a decision it explained was because they wanted banks to lend more to the private sector. 

  • The CRR empowers the central bank to sequester up 27.5% of customer deposits held by commercial banks, effectively restricting the banks from accessing the money. The restrictions impact significantly on the ability of some banks to generate interest income reducing the margins that banks can make in a given period.
  • The CRR debits are derived via a complex calculation involving a balance between a minimum loan to deposit ratio banks are expected to achieve and what they have in their balance sheet as cash deposits.
  • Banks that fall below the CBN’s loan to deposit ratio requirement of 65% have the full weight of the CRR imposed on them.

READ: CBN says bank credit grew by N290 billion in 6 weeks as lending rates drop

Banks have secretly complained bitterly about the level of CRR debits highlighting the effects it has on their bottom line especially Net Interest Margins. The year 2020 was also characterized by lower interest rate environment as banks earned much lower from Treasury Bills and other risk-free government securities.  

Sigma Pensions

What they are saying

Despite the claims, Net Interest margins for the commercial banks under review blew past N2 trillion for the first time in 2021 as lower cost of funds helped cushion the effects of lower interest rate environment and limited access to OMO securities. For example, GT Bank remarked in its investor presentation that it was able to mitigate the impact of CRR from sources such as revaluation of its foreign assets.

“CRR increase of 127.4% (₦565.1bn), funded through improved Naira liquidity largely from OMO maturities impaired the Group’s ability to take maximum advantage of opportunities to optimize its earnings potential. The Bank was however able to cushion the impact of CRR on earnings through optimization of its US$ liquidity and Revaluation Gains. The Bank benefitted from the US$1.15bn long position owing to devaluation of Naira against US$.” GTB

READ: CBN reportedly suspends Paystack and other non-bank financial institutions from offering BVN validation services

Zenith Bank also confirmed the impact of lower yield environment on their net interest margin in 2020 when they released their 2020 full year results.

“This retail drive, coupled with the low-interest yield environment helped reduce our cost of funding from 3.0% to 2.1% and also reduced our interest expense. However, the low-interest environment also affected net interest margin, which declined from 8.2% to 7.9% in the current year due to the re-pricing of interest-bearing assets.” Zenith Bank

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One of the reasons cited by the CBN for introducing this policy in 2019 was to reduce the amount of customer deposits commercial banks were channeling into treasury bills as against lending to the private sector. Since its introduction, lending to the private sector has increased to N30.6 trillion from N26 trillion, data from the CBN’s monetary credit stats reveal.

Another reason cited by experts as an impetus for the CRR is the CBN’s capital control strategy where it limits the amount of naira available for banks to engage in illegal forex roundtripping by arbitraging from the disparity between the parallel market rates and the official rates.

READ: CBN says bank credit grew by N290 billion in 6 weeks as lending rates drop

What CBN does with the money?

Despite the CBN’s official claims that the CRR is required to help stimulate lending to the private sector, critics believe there is more to it.

In conversation with Nairametrics, Critics of the central bank’s CRR Policy who prefer to remain anonymous suggest some of the CRR debited from the banks are used to fund the Federal Government’s revenue shortfalls via the controversial Ways and Means provision of the apex bank. According to the CBN over N10 trillion has been extended to the Federal Government via Ways and Means since 2019, the highest on record.

READ: CBN reportedly suspends Paystack and other non-bank financial institutions from offering BVN validation services

Coronation ads

To repay the money, the CBN in collaboration with the Ministry of Finance announced the introduction of “Special Bills” a fixed income security that offers commercial banks a window to earn an income on their balances held by the CBN. Some of the features of the Special Bills include the following;

  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.

Data from the FMDQ OTC reveals Special Bills maturing in 52 days are currently trading at a yield of 5.43% as of Friday.

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