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Financial Services

CRR Compliance: Banks suffer another N226 billion in CRR debits

Nigeria banks have had their vaults debited of N226 billion by the Central Bank of Nigeria in the apex bank’s latest CRR sequesters.

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diaspora remittances, Total credit to the economy rose to N19.54trillion – CBN Governor, CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

Deposit Money Banks (DMBs) have collectively suffered a debit of N226 billion in compliance with the Cash Reserve Requirements (CRR) fixed by the CBN.

According to a reliable source, the debit occurred in the week ended November 20, 2020. This follows a whopping N917.5 billion debit recorded a month ago as reported by Nairametrics. The central bank imposed CRR sequesters on banks that fail to meet its minimum lending targets as a percentage of deposits.

READ: Nigerian economy slips into recession as GDP contracts by 3.62% in Q3 2020

In its September monetary policy communique, the bank claimed its policy measures have led to increased lending in the economy emphasizing the need to double down on it.

“The Differentiated Cash Reserves Requirement (DCRR) and the minimum Loan-to-Deposit Ratio (LDR), have ensured a significant stream of credit to the real economy. As at end-August 2020, aggregate bank credit had risen by about N3.7 trillion relative to its level in May 2019, when the LDR policy was introduced. The outlook for credit to the economy remains positive given that these policies are still in place and, importantly, that the banking industry continues to be resilient.”

READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

READ: Crypto: Alpha Finance gains 400% in 10 days, supported by a big bank

                                            Source: Nairalytics Research

READ: Banks guaranteed N3.6 billion loans to farmers under the ACGSF – CBN

What you should know

  • Out of the N226 billion debited for November 2020; top five (5) banks in Nigeria – FUGAZ, bore the biggest brunt, with a combined debit of N137.5 billion, implying that the top 5 banks accounted for 60.8% of the total debit for this month.
  • The break down of the debit for the top five banks are; GT Bank (N59.5 billion), Zenith Bank (N30 billion), FBN (N20 billion), Access (N18 billion), and UBA (N10 billion).
  • Nairametrics had earlier reported that CBN increased the CRR in January by 5% to 27.5% to address monetary-induced inflation, whilst retaining the benefits from the CBN’s LDR policy.
  • Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

READ: FUGAZ Banks suffer N1.9 trillion in CRR Debits in Q2

Explore Data on the Nairametrics Research Website

Chidi Emenike is a graduate of economics, a Young African Leadership Initiative Fellow and an Investment Foundations certificate holder. He worked as a graduate Teaching Assistant in the Federal College of Education Kano and is also a trained National Peer Group Educator on Financial Inclusion

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Financial Services

Ratings agency, Moody’s reveals it is reviewing First Bank’s ratings

Moody’s explained why it might downgrade First Bank’s ratings.

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Moody’s Ratings agency said on Thursday that it has put First Bank of Nigeria on review for a downgrade after the central bank sacked the board of directors and replaced them with new directors.

Moody’s made this statement in a report titled ‘Removal of Non-Executive Board Members Highlights Governance Shortcomings.’

In a quote, Moody’s said:

“Moody’s Investors Service, (“Moody’s”) has today placed all long-term ratings and assessments of First Bank of Nigeria Limited (First Bank) on review for downgrade. The review will focus primarily on an assessment of evolving governance considerations at First Bank, specifically corporate governance developments. The rating action follows the dissolution of First Bank’s board by the Central Bank of Nigeria (CBN), the bank’s primary regulator, on 29 April 2021. As a result of this action by the CBN, all the non-executive directors were removed while the executive management remained in place.”

The Governor of the Central Bank of Nigeria, Godwin Emefiele, had last week announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary, First Bank of Nigeria Ltd following the initial removal of its MD/CEO Dr Sola Adeduntan. Following his sacking of the board, he set up a new board for the bank holding company and its subsidiary and also reinstated Adeduntan as MD/CEO.

Moody’s mentioned that the regulatory actions demanded of First Bank by the CBN introduces a clould of uncertainty over the outlook of the bank. For example, the CBN had asked the bank to divest from its holdings in two listed companies while also recovering its loans from one of them.

“The review for possible downgrade reflects the rating agency’s view that the removal of all non-executive directors of the bank’s board by the regulator demonstrates corporate governance shortcomings and weaknesses in board oversight. The bank also needs to implement regulatory directives concerning the resolutions of loans to, and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.

Moody’s notes that the outcomes of these developments are uncertain at this point, and the final and long-term governance, reputational and financial implications of the events for First Bank are also unclear.”

The central bank directive sacking the board of the bank also retained its executive management perhaps suggesting that the CBN had confidence in the ability of the MD and his team to manage the bank. Moody’s also noted this in its briefing.

“While the bank’s executive management team remained the same, the rating agency believes these developments could distract management’s focus on implementing the bank’s strategic plan and road to recovery. First Bank management’s immediate key target was to reduce nonperforming loans (NPLs) to levels comparable with domestic peers. The rating agency recognises that, in the context of asset risks, the bank took steps to reduce its stock of problem loans, with its reported NPL ratio falling to 7.7% at year-end 2020 from 25.9% in 2018.”

Will Moody’s downgrade First Bank?

The rating agency explained that the decision to downgrade will depend on how strong the bank’s corporate governance structure is and whether the CBN will impose additional sanctions. If any of these crystallizes, it could downgrade its ratings.

“The bank’s long-term deposit ratings can be downgraded if flaws in the bank’s governance systems exist, and if the CBN imposes additional sanctions on the bank, including, but not limited to, conditions to address any vulnerabilities that may be discovered. Financial output that is less than anticipated could also result in a rating downgrade.”

Moody’s, however, poured water on any optimism around a rating upgrade.

Given the review for downgrade and the pessimistic outlook on the government of Nigeria, there is a slim chance that First Bank’s ratings will be upgraded. Stronger solvency progress than currently reflected in the ratings, combined with a stabilization of the sovereign outlook, could result in the outlook being stabilized.

Why is rating important?

Corporate Organizations desire positive ratings because of the effect it has on their ability to raise capital as well as the cost of capital. A high credit rating typically attracts positive investor sentiments helping organizations tap the debt and equity markets, especially from institutional investors.

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Business

Insurance companies paid N4 billion in claims after EndSARS protests – NIA

The NIA chief assured that some insurance operators were still working to settle genuine claims as most claims from insured businesses had been paid.

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Insurance companies paid N4 billion in claims after EndSARS protests - NIA

The Nigerian Insurers Association (NIA) says Insurance companies paid N4 billion in claims to over 2000 businesses affected by the aftermath of the EndSARS protest after hoodlums took to the streets.

This was disclosed by Mr Ganiyu Musa, Chairman, NIA, on Thursday in Lagos.

The NIA chief assured that some Insurances operators were still working to settle genuine claims as most claims from insured businesses had been paid.

READ: Marginal oilfield: Bid winners allowed to make payments in naira – Minister

“The number of insured businesses that were affected at the last count was about 2,000 insured loss and the industry has settled N4 billion claims out of N4.5 billion in respect of the #EndSARS protests.

Once they are documented and completed, we have the commitment of our members that the claims will be paid timely,” he said.

He added that the association would continue ensuring members pay genuine claims to clients.

What you should know

Recall Speaker of the House of Representatives, Femi Gbajabiamila disclosed that Lagos State will need about N1 trillion for the reconstruction and repair of the properties and infrastructure that was vandalized and destroyed by hoodlums.

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