Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has advised Nigerian banks to support the media and aviation sectors through loan disbursements.
This is in view of the lingering Coronavirus pandemic which has wrought major economic havoc across different sectors, leading to revenue declines and multiple job losses.
In a series of tweets posted on Tuesday night via CBN’s official Twitter handle, it was disclosed that Emefiele asked the banks to help avert the spate of job losses already being recorded amongst journalists and aviation workers.
In order to avoid massive job loses in the media industry due to the lingering pandemic, Gov. Godwin Emefiele urges banks to support the media industry.
— Central Bank of Nigeria (@cenbank) August 25, 2020
Understanding COVID-19’s devastating impact on the media industry
The media and aviation sectors are among the hardest hit by the pandemic. An earlier report by Nairametrics uncovered how most print media organisations have had to slash salaries by 50% whilst laying off many staff, even as the current pandemic-induced economic climate continues to make it harder to operate.
As you may well know, the media industry mostly relies on advertising revenue to thrive. However, inasmuch as advertising is critical for most companies and organisations, they tend to drastically cut down on their advertising budgets during a recession. Unfortunately, Nigeria is in a recession, no thanks to the COVID-19 pandemic.
Meanwhile, the pandemic grounded planes and dried up airlines’ revenues
Earlier this month, Nigeria’s Air Peace announced that it had sacked about 70 of its pilots and reduced staff salaries by as much as 40%. The sad decision was, of course, taken to protect the company against the adverse effects of COVID-19.
In a similar development, the management of Bristow Helicopters Limited also announced the sack of about 100 pilots and engineers. Bristow’s announcement came barely 24 hours after Air Peace’s announcement.
Bristow Helicopters, which provides auxiliary services to the oil and gas industry, also blamed COVID-19 for the decision to lay off the pilots.
For more than two months, local and international flights were suspended, as planes were grounded in a bid to curtail the spread of the deadly Coronavirus. This move, though necessary, understandably affected airlines’ revenues; hence the layoffs.
Local flights only just resumed earlier this month, with international flights expected to follow suit later this week.
Now, as planes resume flights, CBN’s Emefiele wants banks to do all that they can to avail airlines the financial support they need to bounce back.
#CBN Gov.. Mr. Godwin Emefiele urges banks to do all in their power to support the aviation industry in Nigeria.
— Central Bank of Nigeria (@cenbank) August 25, 2020
Lending amidst the uncertainties
Nigeria’s apex bank has always encouraged banks to lend. In late 2019, it carried out an upward review of the Loan to Deposit Ratio (LDR) from 60% to 65%, and directed Deposit Money Banks (DMBs) to comply.
Interestingly, the CBN’s stance on loans has been yielding results. Last week, Nairametrics reported that the value of loans given by banks to the private sector increased from N16.251 trillion in June 2019 to N18.632 trillion as at the end of May 2020. This represents a 21.53% (or N3.5 trillion) increase within a 1-year period.
Despite the progress, banks are being careful about who they lend to and how they lend. This is because they must guard against any possiblity of bad/non-performing loans.
Speaking of non-performing loans, CBN Deputy Governor, Kingsley Obiora, while commenting on the recent increase in banks’ lending to the private sector, also noted that “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.”
It should be noted that the CBN had recently averted major bad loans by encouraging banks to restructure as much as 41% of their loans to customers. Nairametrics quoted Governor Emefiele, who explained why this became imperative.
“If the CBN did not ask the banks to grant these forbearances to their customers, the loans will go bad immediately by our prudential ratios,” he said at the end of last month’s MPC meeting.
CRR: Banks suffer N917.5 billion debits in latest CBN action
The central bank debited Nigerian banks N917.5 billion last week in its latest CRR action.
Nigerian banks suffered a total of N917.5 billion in new CRR debits from the Central Bank of Nigeria. Reliable sources inform Nairalytics Research that the latest debits occurred in the week ended October 23rd, 2020.
The cash reserve requirement is the minimum amount banks are expected to leave retained with the Central Bank of Nigeria from customer deposits. In January, the CRR was increased by 5% to 27.5% by the CBN Monetary Policy Committee (MPC) who explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.
From the data, Zenith Bank topped the list with N285 billion followed by UBA with N160 billion. The rest of the FUGAZ, Access, FBN, and GTB were debited N140 billion, N95 billion, and GTB N55 billion respectively. The FUGAZ also suffered a N1.9 trillion debit in CRR sequesters in the second quarter of 2020 (April – June) alone.
Nigeria’s central bank has since 2019 debited Nigerian banks a chunk of their deposits as part of a mutually inclusive cash reserve requirement (CRR) and Loan to Deposit Ratio policy that is targeted at coercing banks to lend more to the private sector.
Last month, Nairametrics reported that the CBN now holds a total of N6.57 trillion in CRR debits from the nation’s top 5 banks a whopping 43% higher than the N4.58 trillion held in March and more than double the N3.5 trillion CRR debits as of December 2020. CRR debits in the third quarter of 2020 will be revealed when banks release their results in the coming days and weeks.
Meffynomincs: CBN under the leadership of Godwin Emefiele has deployed several heterodox policies as it strives to stimulate the economy and manage the exchange rate crisis in the absence of strong fiscal support.
- Interest rates on fixed deposits and money market instruments have fallen to single digits despite the galloping inflation rate.
- Last month, the CBN monetary policy committee admitted it was no longer combating inflation but will direct its policies towards stimulating lending to the private sector hoping this will spur local production.
- This policy has placed banks in the crosshairs with the Apex bank exposing them to CRR debits if they cannot use customer deposits to spur lending.
#EndSARS: Access Bank announces N50 billion interest-free facility for businesses
Access Bank Nigeria Plc has announced plans to offer N50billion interest-free credit facility to individuals and businesses.
Access Bank Nigeria Plc. has announced N50 billion in support of Nigerians through interest-free loans and grants to support communities, the youths, and micro, small and medium-sized businesses.
This information was disclosed by the bank through its official LinkedIn page.
The bank’s official statement read thus,
“Now more than ever, we remain committed to our purpose of impacting lives positively. In light of the recent occurrences, we will be supporting Nigerian businesses with 50 Billion Naira interest-free loans and grants. Watch this space for more information.”
Why it matters
The impact of the pandemic, coupled with the hijacked #EndSARS protests that led to the looting of businesses and destruction of properties has thrown so many Nigerians into debts.
This show of support from Access Bank will help alleviate and stimulate economic activities, as well as produce many positive multiplier effects on the economy.
CBN reviews appointment requirements for CCOs in Banks
The CBN has reviewed the appointment criteria for CCOs in Merchant Banks and Regional Banks.
The Central Bank of Nigeria (CBN) has reviewed the appointment criteria for Chief Compliance Officers in Merchant Banks and Regional Banks (Commercial and specialized).
This is according to a circular issued by the apex bank dated October 9, 2020, and signed by its Director of Financial Policy and Regulation Department, Kevin Amugo.
According to the latest notice, Merchant banks and Regional banks are hereby granted dispensation to appoint CCOs on a grade not below an Assistant General Managers. However, the CCOs will report directly to the ECO of the financial institutions who have sole responsibility for compliance matters in the bank.
This latest action by the CBN is the sequel to consultations and engagement with stakeholders emanating from its earlier circular referenced FPR/DIR/GEN/CIR/06/004 of September 28, 2016, in which the tentative requirements for Executive Compliance Officers and Chief Compliance Officers of deposit money banks were mooted.
(READ MORE:CBN moves to ring-fence Disco collections)
Meanwhile, the requirements and responsibilities of Executive Compliance Officers remain as earlier communicated in the circular dated 28 September 2016.
A part of the recent circular signed by Mr. Kevin read thus,
“Further to the circular referenced FPR/DIR/GEN/CIR/06/004 of 28 September 2016 on the appointment of Executive Compliance Officers (ECO) and Chief Compliance Officers (CCO) of deposit money banks, the CBN has, after due considerations and presentations by stakeholders on the size, structure, operation, and dynamics of classes of operators in the sectors reviewed the requirements for the appointment of Chief Compliance Officers.”