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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 issues framework for QR payments
CBN has issued a framework that would guide Quick response (QR) code payments in Nigeria.
The Central Bank of Nigeria has issued the framework that would guide Quick Response (QR) Code Payments in Nigeria.
This is a proactive move by the Apex bank towards ensuring the safety and stability of the Nigerian Financial System, as well as promoting the use and adoption of electronic payments and foster innovation in the payments system.
READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN
Quick Response (QR) Codes are matrix barcodes representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.
The codes are used to present, capture and transmit payments information across payments infrastructure and further enable the mobile channel to facilitate payments and present another avenue for promoting electronic payments for micro and small enterprises.
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What you should know
- Quick Response (QR) codes are two-dimensional bar codes. QR code payments allow merchants to receive payments from customers simply by scanning generated QR codes using a smartphone camera. The QR code payments carry the purchase transaction information to the mobile device of the buyer/customer.
- Making payments via QR codes is very secure. It is because the QR code is nothing but just a tool that is used to exchange information. Any data which is transferred via QR codes is encrypted, thus making the payment secure.
- The Participants in QR Code Payment in Nigeria include Merchants, Customers, Issuers (Banks, MMOs and Other Financial Institutions), Acquirers (Banks, MMOs and Other Financial Institutions) and Payments Service Providers.
- QR payments are increasingly becoming a popular means of payments in Nigeria, and some industry players would see the framework as a perfect way of regulating the sector.
- QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and Wi-Fi passwords and lots more.
- The popular and common argument is that since POS machines are expensive, cheaper options such as QR scanners should be pushed forward to local traders.
READ: Telecoms, FSI to hugely boost Nigerian Economy in 2021 – CWG’s Business Director
Financial Services
CBN unveils framework for regulatory sandbox operations
CBN has issued a regulatory Sandbox framework towards engaging with the operators in the Fintech space.
Financial Services
Standard Chartered Nigeria Plc crashes ‘personal loans’ interest rate to 1% monthly
The Bank crashed its interest rate to one of the lowest in Nigeria’s lending space.
Standard Chartered Nigeria Plc, has crashed its interest rate for ‘personal overdraft’ from 1.25% to 1% per month, according to information seen by Nairametrics.
Nairametrics understands that this review makes the rate, one of the lowest in Nigeria’s lending space, especially when compared to other players in the industry.
READ: Telecoms, FSI to hugely boost Nigerian Economy in 2021 – CWG’s Business Director
This is a strategic move by the bank as it makes major inroads into Nigeria’s competitive but lucrative retail end of lending. The retail end which includes divisions such as personal loans, payday loans is highly competitive with Fintechs, and other banks all jostling for the same market.
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Despite efforts by some of the banks to restructure their loan books due to the adverse effect of the pandemic, banking sector credit to the private sector improved to N19 trillion in the third quarter of 2020 representing a 15.6% increase from 2019.
READ: Nigeria’s GDP growth to rebound between 1.7% and 2.0% in 2021 – United Capital report
Notably, according to a CBN survey on credit conditions as reported by Nairametrics, supply of secured and unsecured credits to households is expected to increase in the first quarter of 2021, having recorded an increase in the previous quarter (Q4 2020).
Meanwhile, a cursory review of lending data on the websites of some sampled financial institutions, revealed that some financial institutions retained or downwardly reviewed their monthly interest rate on payday loans. For example, GT Bank Quick credit crashed its rate from 1.75% to 1.33%.
READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN
Furthermore, UBA Click credit maintained its 1.58% charge, Zenith Bank term loan remained at 2.16%, Renmoney retained its 2.98% interest rate, and a host of others.
READ: Nigeria Fintech startup, CredPal raises $1.5million funding
What you should know:
- According to Standard Chartered, Personal Overdraft facility provided by Standard Chartered Plc is a revolving facility targeted at salaried customers with 12 months tenor and usually based on 50% of the net monthly salary of customers.
- A minimum salary qualification of N50,000 is specified.
