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Financial Services

Banks’ loans to private sector increase by N3.50 trillion in one year – CBN

The document stated that the credit was stimulated by the policy on Loan-to-Deposit Ratio (LDR).

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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 value of loans given to the private sector by Nigerian banks increased by N3.5 trillion –from N16.251 trillion in June 2019 to N18.632 trillion as at the end of May 2020.

This is according to data obtained by Nairametrics from the Central Bank of Nigeria. According to the data, this growth represents an increase of 21.53%.

READ ALSO: Why Warren Buffett’s company is buying shares of a gold mining company

Breakdown of loans

At the end of June 2019, a total of  N15.13 trillion was given to the private sector. The figure increased to N15.61 trillion by the end of July 2019 before dropping to N15.56 trillion at the end of August 2019.

[READ ALSO: Banks’ loan to private sector increases by N3.47 trillion in 2019]

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  • Out of the total N18.63 trillion credit to the private sector in May 2020, the Oil and Gas industry (downstream, natural gas and crude oil refining) attracted N3.60 trillion.
  • This was followed by the Manufacturing sector which attracted N1.99 trillion within the same period.
  • The General Services segment also attracted N1.60 trillion in May 2020.
  • The Finance, Insurance and Capital market segment followed with a N1.32 trillion credit.
  • The Oil and Gas sector (upstream oil and gas services) attracted N1.29 trillion in May 2020.
  • Trade and General Commerce attracted N1.25 trillion.
  • During the year, credit to the private sector hit the highest in May 2020 at N18.53 trillion.
  • On the other hand, credit to the government rose to the highest at N1.55 trillion in January 2020.
  • A closer look shows that credit to government was at its lowest at N1,21 trillion by August 2019.

READ ALSO: Nigerian Banks issue N3.3 trillion in new loans in June 2020

Drivers of the credit

In the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting communique, which included the personal statements of members of the apex bank’s MPC, Kingsley Obiora, Deputy Governor, CBN, stated that the credits were driven especially by demands from the manufacturing sector, consumer credit, general commerce, information and communication, and agriculture, among others. He said:

“Under the circumstances, the financial system has maintained a sound and stable position, following effective interventions by the CBN.

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“Short-term interest rates continue to suggest some surfeit in the system with average Open Buy Back (OBB) and inter-bank call rates rising to 5.75 and 11.31% in June 2020, from 5.22 and 5.80% in May 2020, respectively.

“Non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4% in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”

READ ALSO: No trophy for International Breweries after bland Q2 results

An expert’s perspective  

All things being equal, the total loans given by banks to the private sector should be more than the figures stated above. But all things are not equal, even as some  credit experts have raised concerns about current realities of financial constraints faced by Micro Small and Medium Enterprises (MSMEs) in the country.

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While speaking recently during a webinar by the Development Bank of Nigeria, Access Bank’s Group Head of Emerging Business, Ayodele Olojode, explained that MSMEs do not have regular and sustained access to finance at high-interest rates. This problem is coupled with lack of tangible collateral and economic conditions, which hamper their access to finance. She said:

“Risk-sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy.”

She further noted that the credit guarantee industry in Nigeria is still at a nascent stage, where the volume of guarantees and the size of the industry contributions to SMEs remain low compared to peers in other economies.

Note that a credit guarantee scheme provides third-party credit risk mitigation to lenders through the absorption of a portion of the lender’s losses on the loans made to MSMEs in case of default, typically in return for a fee.

In all, Credit Guarantee is the future because it will compensate for insufficient collateral, provide regulatory capital relief for banks, growth for MSMEs, increased economic GDP, and job creation.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Financial Services

Young female professionals in insurance are constrained by inadequate opportunities – Dive In

Young female professionals in the insurance sector are constrained by inadequate opportunities, a survey has revealed.

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A survey has revealed that despite the ambition to attain a top-level career, young female professionals in the insurance sector are constrained by inadequate opportunities relative to gender bias and unequal pay.

The survey, which was conducted by Dive In team, also found that female professionals in the sector face limitations on their rise to leadership amid other challenges.

The survey, which was disclosed at the Dive In Nigeria Festival webinar on Thursday, further highlighted that females are willing and ready to take up more challenging roles within the sector and have to resort to professional bodies for support and guidance in their careers.

At the webinar themed ‘Promoting Inclusion & Diversify in the Nigerian Insurance Industry for a Quantum Leap, which was attended by Nairametrics, the immediate past Managing Director, African Alliance Insurance Plc, Funmi Omo, one of the top 100 women CEOs in Africa, explained that equal opportunities, equal pay, female empowerment, and commitment from leadership in firms are crucial to the development of the sector in Nigeria.

She said, “Women should be seen as the backbone of any economy, and as such, they need to be given more attention. From the insurance standpoint, we need to have a more structural and deliberate approach to thrive. Diversity is very good, it brings about balance. Leaders have to step up to make the insurance sector more welcoming and structured. They need to be flexible and avoid being rigid and also take advantage of the newness and freshness of the younger generation. Do not micromanage them, let them explore, allow them to breathe, and make their own mistakes so they can see a future in the industry.”

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(READ MORE: First Bank empowers women through online community)

Some leading females in the industry also lent their voice to the younger female professionals in insurance & finance in a campaign titled “Letters to my younger self.”

They shared lessons that would help the younger generation develop a mindset and character required for success within the sector.

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Other speakers included Adetola Adegbayi, Executive Director, General Insurance Business Division, Leadway Assurance Company Ltd, a Legal Practitioner with extensive experience in Legal Research, Corporate Legal Practice, Insurance, and Financial Services; Nike Anani, Co-Founder African Family Firms, a firm dedicated to assisting second-generation family members (“NextGens”) in identifying and implementing new opportunities, shortening the journey from identification to impact.

On steps being taken to promote diversity and inclusion in hiring strategies, MD, African Reinsurance Corporation, Dr. Corneille Karekezi said, “We are aware that women are not well represented in the workplace and as such at Africa Re Group, we make special provision for women inclusion in nomination for senior roles, provision for tribal diversity and inclusion to drive equality within the corporation.”

He stressed that the mandate for them at his firm is, integrating Africa, and to achieve this, it is important that diversity and inclusion are promoted.

“Communications and the intention to achieve equality helps us ensure diversity and inclusion,” he added.

About Dive In

Dive In is a global movement in the insurance sector to support the development of inclusive workplace cultures. Its mission is to enable people to achieve their potential by raising awareness of the business case and promoting positive action for diversity in all its forms.

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Economy & Politics

CBN reduces MPR from 12.5% to 11.5%

The Governor of the CBN has announced the reduction of MPR from 12.5% to 11.5%.

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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 Monetary Policy Committee (MPC), of the Central Bank of Nigeria (CBN), has voted to reduce the Monetary Policy Rate (MPR), from 12.5% to 11.5%. This was disclosed by Governor, CBN, Godwin Emefiele, while reading the communique at the end of the MPC meeting on Tuesday.

READ: This is a copy of the Self-Certification form govt. wants targeted account holders to fill

The committee retained CRR at 27.5%, stating that the recent inflationary pressures is not driven by monetary policies, rather as a result of structural policies.

Highlights of the Committee’s decision

  • Reduce the MPR by 100 basis points, from 12.5% to 11.5%
  • Adjust asymmetric corridor, from +200/-500 to +100/-700 basis points around the MPR
  • Retain CRR at 27.5%
  • Retain liquidity ratio at 30%

Explore the Nairametrics Research Website for Economic and Financial Data

According to Emefiele, the Committee reviewed the choices before it, bearing in mind its primary mandate of price stability, and the need to support the recovery of output growth. Consequently, the Committee noted that the likely action aimed to address the rise in domestic prices would have been to tighten the stance of policy, as this will not only moderate the upward pressure on prices, but will also attract fresh capital into the economy, and improve the level of the external reserves.

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The Committee however, noted that this decision may stifle the recovery of output growth, and drive the economy further into contraction.

On easing the stance of policy

The MPC was of the view that this action would provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment, and support the recovery of output growth.

In addition, the Committee noted the tendency of an asymmetric response to downward price adjustments by ‘Other Depository Corporations’, thus undermining the overall beneficial impact of a reduction, to the cost of capital.

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After all considerations, members were of the opinion that the option to loose will complement the Bank’s commitment to sustain the trajectory of the economic recovery, and reduce the negative impact of COVID-19.
He also stated that, liquidity injections are expected to stimulate credit expansion to the critically impacted sectors of the economy, and offer impetus for output growth and economic recovery.

Based on the foregoing, the Committee decided to reduce the MPR by 100 basis points to 11.5% and adjust the asymmetric corridor to +100/-700 around the MPR.

MPC projects economic growth

Recall, that the Nigerian economy contracted by 6.1% (year-on-year) in the second quarter of the year, as a result of the disruptions caused by the COVID-19 pandemic. The MPC however, projects a positive growth in the last quarter or at least Q1 2021.

“With a persistent focus on activities meant to reverse the contraction, the MPC projects growth at positive levels in Q4 2020, or latest by Q1 2021, based on the anticipated positive results from the coordinated and sustained interventions by both the monetary and fiscal authorities.”

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Financial Services

CBN grants Greenwich Trust Limited operational license for merchant banking

CBN has upscaled Greenwich Trust Limited to the status of a merchant bank.

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CBN grants Greenwich Trust Limited operational license for merchant banking, NSE Market Data, NSE records total transactions of N121.99 billion in August , 2019 events in the Nigerian capital market and outlook for 2020, Why you might need a capital market lawyer

The Central Bank of Nigeria (CBN) has upscaled Greenwich Trust Limited and granted it, operational license for merchant banking in the country.

According to an official statement released by the firm, the entity would be known as Greenwich Merchant Bank Limited. This license allows Greenwich Merchant Bank to upscale and offer such diverse services as corporate banking, investment banking, financial advisory services, securities dealing, treasury wealth and asset management, etc., making it possible to provide increased value to stakeholders beyond its previous scope.

Explore the Nairametrics Research Website for Economic and Financial Data

Recall that the minimum capital requirements for establishing a merchant bank according to Merchant Banking Licensing Regulations in 2010 are N15 billion

(READ MORE: CBN debits banks N216.1 billion for CRR compliance)

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With the addition of Greenwich Merchant Bank, Nigeria now has six merchant banks. The others are; FBN Quest, Coronation Merchant Bank, DSH Merchant Bank, Nova Merchant Bank and Rand Merchant Bank.

About Greenwich Trust Limited

Greenwich Trust Limited is an investment banking firm duly registered with relevant authorities such as the Nigerian Securities and Exchange Commission (SEC). It is a diversified firm with subsidiaries such as Asset management, GTL Properties, GTL Securities Limited, Cedar Express Limited and Meyer Plc.

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