Financial Services
Foreign investment inflow into banking sector falls by 95% in Q2 2020
The foreign inflow of capital into the banking sector fell to as low as $140 million in the second quarter of 2020, the lowest inflow since 2017
The foreign inflow of capital into the banking sector fell to as low as $140 million in the second quarter of 2020, the lowest inflow since the first quarter of 2017. This contrasts sharply with the $2.9 billion inflow reported in the first quarter this year
The report was contained in the Capital Importation report published by the National Bureau of Statistics, as seen by Nairametrics. Nigeria has suffered foreign currency shortages since the crash in oil prices triggered an outflow of foreign portfolio investments out of the country.
READ: Nigeria’s debt rises to $79.5 billion, as debt to revenue ratio worsens
The outbreak of the Covid-19 Pandemic has also affected foreign investments into emerging markets like Nigeria as investors flee to the safety of the risk-free assets in the United States. Some of the outflows have also been redirected to the United equities markets which have surged on the back of a tech bubble despite the Covid-19 pandemic.
Why the drop?
The drop in inflow into the banking sector is believed to be a fallout of the global economic crisis which has limited banking sector requirement for foreign investments either as debt or equity.
- The drop in inflow into the sector also correlates with the drop recorded in the money markets and equity.
- For example, inflows into these sectors fell to $533.9 million in the second quarter from $4.5 billion reported in the previous quarter.
- According to Nairametrics records, no bank has approached the Eurobond market since the pandemic started as the sector focusses on containing loan losses to shore up capital adequacy.
- In contrast, banks have resorted to commercial papers and bonds taking advantage of the low-interest-rate environment to raise capital.
- Another reason is the foreign currency risk associated with foreign currency-denominated capital in a deteriorating economy that is exposed to further devaluation and credit risks.
READ: Nigerian Stocks snap 7-year losing streak to post first gain in August
What this means: Covid-19 has been blamed for most of the challenges currently being faced in the economy. A fall in foreign investment inflow into the country can also be blamed on Covid-19 however much of this is also due to the low-interest-rate environment in the country.
Some of the central bank policies such as restriction on OMO bills, LDR, and CRR ratios have also contributed to the drop in interest rates.
Financial Services
CBN reveals framework for the N75 billion Youth Investment Fund
The Nigerian Youth Investment Fund will be funded through the NIRSAL MFB window of the CBN.
The Central Bank of Nigeria (CBN) has revealed the implementation framework for the Nigerian Youth Investment Fund.
This was disclosed in a publication by the Development Finance Department under the auspices of the Central Bank of Nigeria.
The CBN stated that the Nigerian Youth Investment Fund (N-YIF) would be funded through NIRSAL MFB window, with an initial take-off seed capital of N12.5 billion.
READ: #EndSARS: FG creates new N25 billion Youth Fund, to increase to N75 billion in 3 years
The N-YIF aims to financially empower Nigerian youths to generate at least 500,000 jobs between 2020 and 2023.
Objectives of the scheme:
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Improve access to finance for youths and youth-owned enterprises for national development.
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Generate much-needed employment opportunities to curb youth restiveness.
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Boost the managerial capacity of the youths, and develop their potentials to become the future large corporate organizations.
Explore Data on the Nairametrics Research Website
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The fund targets young people between the ages of 18 and 35 years.
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Beneficiaries of NMFB, TCF and AgSMEIS loans, and other government loan schemes that remain unpaid are also not eligible to participate.
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Individuals (unregistered businesses) shall be determined based on activity/nature of projects subject to the maximum of N250,000.
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Registered businesses (Business name, Limited Liability, Cooperative, Commodity Association) shall be determined by activity/nature of projects subject to the maximum of N3.0 million (including working capital).
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The tenor of the intervention is for a Maximum of 5 years, depending on the nature of the business and the assets acquired, of which interest rate of not more than 5% under the intervention shall be charged annually.
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The Federal Ministry of Youth and Sports Development (FMYSD) will collaborate with relevant stakeholders to identify potential training for training/mentoring.
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The youths that are duly screened (and undergo the mandatory training where applicable) shall be advised to login to the portal provided by the NMFB to apply for the facility.
READ: CBN raises alarm over fraudulent loan offers, investment schemes with charged fees
Financial Services
CBN to drive implementation of zero balance account opening in banks
The CBN has urged the DMBs to allow zero balance for the opening of new accounts.
The Central Bank of Nigeria (CBN) has urged the Deposit Money Banks (DMBs) to allow zero balance for the opening of new accounts, as part of the efforts to promote greater financial inclusion across the country.
In addition, the banks are also expected to simplify their account opening processes, while adhering to Know-Your-Customer (KYC) requirements in the push towards financial inclusion.
READ: This is where PSB, CBN got it all wrong
READ: CRR: Banks suffer N917.5 billion debits in latest CBN action
This disclosure was made in the Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for 2020/2021 fiscal year, which was issued by the Central Bank of Nigeria (CBN).
While stating that these measures are part of the efforts to encourage banks to intensify deposit mobilization during the 2020/2021 fiscal years, the apex bank also encouraged banks to develop new products that would provide greater access to credit.
READ: Nigeria @ 60: The Banking Sector and the Nigerian economy
A part of the report reads, “As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilization during the 2020/2021 fiscal years. Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.
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“Banks are also encouraged to develop new products that would provide greater access to credit.”
In addition, the apex bank said that the Shared Agency Network Expansion Facility (SANEF), which was established to enhance the provision of financial services access points in under-served and unserved locations and drive financial inclusion through agent banking, would continue in the 2020/2021 fiscal years.
READ: CBN launches framework for advancing women’s financial inclusion in Nigeria
It states that banks, mobile money operators, and super-agents would continue to render returns in the prescribed formats and frequency to the CBN.
Exclusives
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.
READ: CBN says 17 banks to restructure over 32,000 loans
CRR Debits for Nigerian Banks.
Nairalytics Data
READ: Union Bank suffers N188 billion in CRR debits as at June 2020
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.
READ: Nigeria’s forex devaluation timeline – 2020
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.
READ: CBN reviews minimum interest rates on savings deposit to 1.25%
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.
READ: Nigeria’s telecom sector posts double digit growth of 18.1%, manufacturing, others contract
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.
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