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Financial Services

CBN grants licenses to 3 Payment Service Banks

The 3 Payment Service Banks are Hope PSB, Moneymaster PSB and 9 PSB.

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External reserves, CBN to hold MPC meeting next week, Demand for credit by household increases in Q2 2020 - CBN, CBN grants licenses to 3 Payment Service Banks, Mobile money loan CBN Governor, CBN, Three PSBs get Apex Bank’s provisional to commence operations, Milk Import: Experts advise CBN on FX restriction , CBN automates trading system, introduces electronic form to facilitate exports , CBN campaigns for Made-in-Nigeria products , CBN recent macroeconomic policies, others lead to a higher Fitch rating; from negative IDR to a stable ‘B’ rating, AGSMEIS: CBN expand beneficiaries to 14,638.

The Central Bank of Nigeria (CBN) has granted final licenses to 3 Payment Service Banks (PSBs) to start operation.

The final approval to the 3 Payment Service Banks to operate follows their compliance with the licensing requirements which were stipulated by the apex bank.

This is disclosed in a tweet post by the Central Bank of Nigeria through their official Twitter handle on Friday, August 28, 2020.

READ: OPay’s Country Manager reveals banks that will fizzle out to MTN, other Fintechs 

The 3 Payment Service Banks that were newly granted final approval by the CBN are Hope PSB, Moneymaster PSB and 9 PSB.

The final approval is coming after the CBN issued an updated and revised guideline for the licensing and regulation of Payment Service Banks in Nigeria on August 27, 2020. The first guideline for the PSBs was issued on October 26, 2018.

READ: CBN set to punish exporters who refuse to repatriate export proceeds to Nigeria

The tweet post from the Central Bank of Nigeria reads, ‘’Three Payment Service Banks (PSB) have also been granted final approval to operate as PSBs following compliance with licensing requirements;

  • Hope PSB
  • Monermaster PSB
  • 9 PSB

Back story:

The CBN, while disclosing that the licensing of the new Payment Service Banks will strengthen Nigeria’s financial inclusion drive leveraging mobile and digital channels, has expressed its commitment towards the implementation of policies that will engender a diverse financial system that meets the needs of all stakeholders.

READ: Covid-19: Timeline of every pronouncement made by Nigeria to support the economy

The CBN also said that it will continue to monitor developments in the sector and grant additional PSB licenses in due course.

Payment service banks refer to a new category of the bank with smaller-scale operations and the absence of credit risk and foreign exchange operations. In addition to operating current and savings accounts they can also offer payments and remittance services, issue debit and prepaid cards, deploy ATMs and other technology-enabled banking services.

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The PSBs are to facilitate high volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Financial Services

Amid sell-off, FUGAZ investors lose N34.68 billion in a single trading session

Market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021.

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FUGAZ Banks, loans, loan, Access, Zenith, GTBank, top actively traded stocks on Monday , FUGAZ lead actively traded stocks as bourse ups 1.7%, Nigeria’s top 5 banks spent more than N40 billion on adverts in 2019

Investors in the elite banks in Nigeria- FBNH, UBA, GTB, Access and Zenith have lost a total of N34.68 billion in a single trading session, amid sell-offs.

According to data from the Nigerian Stock Exchange (NSE), the market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021, shedding about 1.6% in a single trading session.

The loss is due to downward pressure on the share prices of the elite banks, evident by the sell-off witnessed in the market. A snapshot of how much each bank lost and the impact is succinctly captured below;

READ: Investors lose N352bn during NSE’s eight days of losing streak

UBA

The United Bank for Africa investors lost a total of N10.26 billion after its market capitalization dropped from N282.15 billion to N271.9 billion as at close of business yesterday.

The drop is due to a sharp decline in its share price which closed at N7.95, shedding about 3.64% in a day.

Investors cashed in on the decline to trade about 26,782,197 units of the Bank’s shares valued at N211, 571,939.35, placing the bank as the fourth most traded stock at the NSE. The volume of shares traded by the bank rose astronomically by 201.9%, when compared to 8.87 million units traded the previous day.

On the other hand, it is pertinent to note that the United Bank for Africa (UBA) is yet to release its audited FY 2020 result.

READ: United Bank for Africa provides $200 million for Nigeria’s Petroleum Industry – Timely financing for Post COVID economic growth

Access Bank

Access Bank Nigeria Plc lost a total of N8.89 billion after its market capitalization dropped from N286.14 billion to N277.25 billion. The loss is due to a decline in its share price from N8.05 to N7.80, indicating a dip of 3.11%.

Just like UBA, Access Bank investors traded a total of 21,586,491 units valued at N168, 090,266.60, placing it as the fifth most traded stock at the NSE today. In lieu of this, Access Bank stock volume appreciated by 229.1%, from 6.56 million traded yesterday.

Access Bank is yet to release its audited financial statements for FY 2020.

READ: Oando share price up by 10% off the back of court ruling

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Zenith Bank

Zenith Bank investors lost a total of N7.85 billion after market capitalization dropped to N794.3 billion today. The marginal drop is due to a slight dip in the firm’s share price, from N25.5 traded yesterday to N25.30 as at close of business, indicating a decline of 0.98%.

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Investors reacted to this drop by trading 38,647,711 units of the bank’s shares valued at N983, 251,467.75, placing the firm as the second most traded stock at the NSE market.

The drop in the market value of Zenith shares is in contrast to what was obtained last week, when investors gained a total of N37.7 billion, the highest recorded by the bank since the famous circuit breaker. The gains were sequel to an impressive financial performance by the firm for FY 2020, after it recorded a PAT of N230.6 billion and declared a final dividend of N2.70 per share.

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FBNH

FBNH investors lost N1.8 billion after its market capitalization declined to N253.06 billion as at the close of business. The drop was due to a 0.7% decline in its share price from N7.1 traded earlier to N7.05.

In lieu of this, a total of 31,253,644 units of the bank’s shares valued at N983, 251,467.75 were traded, placing the firm’s stock as the third most traded stock at NSE. The total volume traded surged by 88.9%, from a total of 16.54 million traded a day earlier.

FBNH had earlier declared a Profit After Tax figures of N79.71 billion for FY 2020, indicating an increase of 8.2% YoY.

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GTB

GTB investors lost a total of N5.89 billion, following a drop in its market capitalization from N932.97 billion to N927.08 billion. The drop was due to a 0.63% decline in share price which closed at N31.50.

It is pertinent to note that GTB is yet to release its audited financial statement for FY 2020.

What you should know

  • The Nigerian Stock Exchange ended on a bearish note on Wednesday, March 4, 2021 after the ASI declined by 0.40% to close at 39,364.67 index points.
  • On a general note, investors lost a total of N82.35 billion, with FUGAZ accounting for 42.11% of the loss.

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Financial Services

Zenith Bank GMD explains why its difficult for SMEs to get loans from  banks

Onyeagwu has highlighted the regulatory challenges that SMEs are faced in trying to secure bank lending.

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Zenith Bank empowers Nigerian SMEs, partners Facebook on SME digital workshop, Zenith Bank MD Explains Why It Is Difficult for Nigerian SME’s To to Get Cheap Loans From Bank 

The Group Managing Director of Zenith Bank, Mr. Ebenezer Onyeagwu  has discussed the impressive positive returns recorded this year by the bank. He also shared some insights on the relationship between commercial banks in Nigeria and Small/Medium Enterprise business owners.

Onyeagwu gave all these insights while speaking in an interview with Arise TV.

On why Nigerian banks charge high-interest loans, making it difficult for small business owners to get single-digit loans for their business, the Zenith Bank GMD explained that the operational costs and regulatory costs involved in running a bank usually sets the pace for every other thing. He listed examples of operational costs involved in running a single bank branch and how all that adds to the bottom line at the end of the day.

He also highlighted regulatory costs which are not particularly known by people outside the banking sector as one of the costs of doing business banks face. These two factors mainly contribute to the high-interest rates banks charge on loans.

“Our cost profile depicts the operating environment. Within the year we saw an upward review in fuel price, which accounted for the increase in our fuel cost. Again, when you are looking at cost of doing business, you also need to look in total, how businesses are being conducted. If I set up a branch today, I would need to provide my infrastructure, I need to provide power, water and in some cases, we even construct the road to provide access to the branch location. So, as a result of the poor state of infrastructure, you see that businesses would now have to contend with providing these resources to get their operations running. So, if we have more available and cheaper utility services and infrastructure to support businesses, of course, the cost would go down.

Then, looking at cost of doing business in banking, it goes beyond those operational costs. We also have things like regulatory cost. A bank like Zenith, given our size, the burden of regulatory cost on us is heavy. By regulatory cost here, I am referring to the Nigeria Deposit Insurance Corporation premium and the Asset Management Corporation of Nigeria fee. So, because of our size, if you look at the numbers, you will see that these regulatory costs account for a whopping 28 percent of our overhead. So, all of them come together to add to the cost of doing business for us as a banking institution in the country,” Onyeagwu said.

On why it is difficult to get single-digit loans from Nigerian banks, Onyeagwu highlighted 3 key reasons why single-digit loans are very difficult to obtain in Nigeria. He listed the following:

  • Fiscal deficit
  • Government Borrowing
  • Money supply and demand

The Zenith GMD stated that it is nearly impossible to issue an interest rate by fiat. He stated that the interest rate will always be determined by market forces.

He said, “First of all, if you are looking at the interest rate, you have to look at it in terms of the theoretical framework and issues around money supply, demand for money, issues around government borrowing, and the fiscal deficits. So, when you put all that together, you will see that you cannot have a situation where you decree interest rate by fiat. Interest rates would always be set by the dynamics and realities in the market. In this case, if you are looking at the interest rate in Nigeria, you have to index it to the risk-free rate. The one-year risk-free rate in Nigeria is like 10 percent. So, it will be difficult to have a single-digit rate in Nigeria.” 

Solutions 

Onyeagwu highlighted the various ways the Central Bank of Nigeria has intervened in a bid it provides single-digit loans to entrepreneurs in certain sectors. Sectors like cinema, movie, ICT, and fashion designing have been enjoying single-digit loans courtesy of various CBN initiatives.

He said, “We have intervention funds such as the Creative Industry Financing Initiative, where banks in the country provide long-term single-digit funding for entrepreneurs who are in cinema, movie, ICT, and fashion designing. We also have what is called the Agri-Business/Small and Medium Enterprise Investment Scheme. It is also a pool of funds available for businesses in that space. You can as well access these loans. Apart from these, the CBN also has different intervention schemes such as the Anchor Borrowers Scheme, the Commercial Agricultural Credit Scheme, and others, and all these loans are single-digit and they provide long-term financing. The big problem we have is that when you see an SME approaching you for the loan, the SME may not have a track record; he walks up to you and tells you that he needs a single-digit loan and needs N20 million.

“But I can’t give you N20 million without looking where you are coming from. So, we cannot decree the interest rate by fiat. But the regulators have done good work by providing funding schemes and whoever is eligible would get such single-digit long-term loans once they meet the criteria. So, the funding is there, but the SMEs when they approach the banks don’t often meet the eligibility criteria.” 

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