Nigeria’s inflation rate increased by 15.75% YoY in December 2020, hitting its highest figure in 3 years.
According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the food inflation index rose sharply by 19.56% in December, caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats.
Nigeria’s food inflation looks gloomier if you consider the fact that the NBS, in its released COVID-19 impact report for the month of August 2020, revealed that 51.3% of Nigerian households obtained loans during the lockdown from mid-March to purchase foodstuffs.
This means that Nigerians cannot afford to buy food and the price of food is skyrocketing every month.
Nairametrics chatted with Cheta Nwanze, Partner at SBM Intel, a Geopolitical Research and Strategic Communications consulting firm and Professor Yomi Fawehinmi, an Agric stakeholder on the causes of food inflation and what should be done to control it.
The border was closed for over a year, depriving many Nigerians and businesses access to some food items and raw materials which prices were now hiked as a result of high demand and few competition within Nigeria. Could the closure have contributed to food inflation?
Nwanze said, “Of course it did. Simply looking at a chart of food inflation makes it clear. The curve, which was rising anyway, began to rise more steeply two months after the borders were arbitrarily closed, essentially the normal lagging effect associated with any change in policy. So yes, it is a fact that the border closure contributed to the rise in food inflation.”
Poor economic policies cannot however be distanced from the continuous rise in the inflation rate. Nwanze believes that the CBN’s mandate concerning the importation of maize is an example of such poor economic policy.
“Policy inconsistencies such as what happened with maize, where imports were restricted despite 2020 being in track to be our worst year in terms of maize production in a while. Now, given that maize is an input for the poultry industry for example, as well as the pharma industry, this had an effect,” Nwanze said.
Agriculture is very central to Nigeria’s economy, providing the main source of livelihood for the majority of Nigerians. The agricultural sector remains the largest employer in Nigeria, employing more than 36% of the labour force.
“Agriculture is actually a science. Without science, Agriculture is drudgery and unproductive. That’s why Netherlands is a small country but feeds the world. Netherlands is the 2nd largest food exporter in the world,” Prof Fawehinmi noted.
Water depletion and desertification have forced herders in the northern part of the country to shift southwards in search of grazing fields. This downwards movement has resulted in clashes between farmers and herders in many states, hence a reduction in the output of food production.
Highlighting the contribution of insecurity to poor harvest and subsequent food inflation, Prof. Fawehinmi said, “Insecurity makes farmers abandon their farms, which reduces output, leading to less market supply and more demand, thereby causing a spike in prices of food items.”
On how pressures in food, utilities and transport are driving the rising inflation numbers, Wale Smith, a Pension Professional revealed in an article that was published on Nairametrics stated that “A combination of weaker farming activity, Naira weakness and Covid-19 lockdowns are behind the uptrend in food inflation. Looking at food inflation, the big pressures came from the farm produce component which accounts for over 90% of food inflation.”
SBM Intel recently reported that that 47% of farmers have zero access to any kind of storage facilities during harvest, which could rise up to as high as 60% for tubers, fruits and vegetables.
“Agricultural products are easily perishable while production remains seasonal, and demand for farm produce is present throughout the year,” SBM stated.
Factors like this combined with reduced output due to insecurity and food import exclusion weighs heavily for the consumer, who can barely afford one square meal.
What therefore must be done to recover?
Professor Fawehinmi suggests intentional steps must be taken to develop and improve on every aspect of the agriculture value chain. He also added that special attention must also be paid to the area of agriculture research.
“We need to improve our agricultural research and innovation. That’s what will drive increased output and productivity. Also, we need to create a balance between imports of food and domestic production. Finally, we should do more about good storage and distribution,” Professor Fawehinmi said.
Agreeing with Prof. Fawehinmi, Nwanze adds that opening up of all the land borders and legally allowing the flow of goods puts Nigeria at a better chance of maximising trade relations with neighbouring countries.
“Open the borders, remove food items from the import exclusion list. When the ban on the importation of maize was announced, SBM did a report that predicted what will happen. It happened as we said four months later. Nigeria is incapable of meeting its food demand given our existing issues such as insecurity, poor farming practices, and a sharply growing population. This means increased scarcity and rising food costs. The only way we can cover the gap is by imports. It’s that simple,” Nwanze said.
How fraudsters fleece elderly Nigerians of their bank deposits
Fraudsters in connivance with some bankers are targeting mostly elderly customers to fleece them of their bank deposits.
Mary Adegoke, 70, is a retired teacher and a depositor with one of the Nigerian Tier-1 banks. The mother of five got a rude shock on Friday, January 8, 2021, when she got a call from a stranger, who claimed to be her new account officer, requesting a One Time Password (OTP) that was sent to her phone a few minutes earlier.
Adegoke told Nairametrics that she wouldn’t have shared the information if the caller had not answered a few security questions like her account number, digits on her ATM card, and Date of Birth. She said, “I had no reason to doubt him after providing the answers. I never understood what he was up to and what the OTP meant and why he asked me to delete it immediately after I shared it with him. A few minutes later, I got a debit alert of N40,000, which was my pension for the month.
“At that point, I started sweating and knew I had fallen victim to fraudsters. But what I still don’t understand is how he got my account number and other personal details.”
Mrs Abimbola Omole, 65, is another retiree and a victim of similar fraud. The retired civil servant is also a depositor with one of the Tier-1 banks, which has its headquarters in Marina, Lagos.
Omole had declined the offer of an ATM card through her account officer before travelling out of the country. The account officer had then proceeded to forge the customer’s signature to request the ATM card.
“I couldn’t believe my eyes when I got debit alerts that a sum of N150,000 was deducted from my account within three days,” a bewildered Omole reported. “When we traced the location of the withdrawal, we found it was in Onitsha. I am sure the banker must have disclosed my details to someone there because she had asked me to lend her money before I travelled,” she recalled.
Adegoke and Omole are only two of several bank depositors, especially elderly citizens, who have been fleeced by fraudsters masquerading as bank staff. These crimes are unmistakably and increasingly targeting a specific class of people – vulnerable elderly people.
Ex-bankers share their experiences
Sources across the top banks revealed that many bankers engage in various fraudulent activities as a result of laxity on the part of some officials in the internal control departments at various levels. Nairametrics found that many of these frauds were perpetrated by third parties in connivance with insiders, targeting mostly elderly customers within the 60-70 years age bracket, who may expectedly not be tech-savvy. This is usually done by requesting that the unsuspecting customers provide vital information such as their Personal Identification Number (PIN), which the fraudsters then use to debit their accounts.
“We treat scores of fraud cases every year and most of them are done in connivance with senior officials of the bank at the branch level. Recently, a fraudster got the PIN of a customer and withdrew N100,000 from the account on a particular Sunday,” a banker who pleaded anonymity told Nairametrics.
A former Manager of one of the Tier-1 banks, in an exclusive interview with Nairametrics, disclosed that three of the staff of the bank in Sokoto were arrested by the Economic and Financial Crimes Commission (EFCC) in March 2020. The bankers were arrested for conspiring to steal the sum of N1.2 million from a customer’s account and were said to have done so by issuing an ATM card in the customer’s name to an impostor who then proceeded to clean out the account.
Although some of this money was later recovered by security agents, investigations reveal that the system is beset with several other unrepentant fraudsters still plying their craft at the expense of unsuspecting customers.
A banker with a Tier-2 bank also shared another case with Nairametrics, which was uncovered by EFCC. According to her, the anti-graft agency uncovered a criminal syndicate of bankers who specialized in forging signatures of deceased bank customers and stealing from their accounts. They also execute fraudulent financial transactions, including unauthorized debits of depositors’ funds.
The alleged members of this syndicate were in March, arraigned before a Judge of the State High Court in Uyo on a 23-count charge bordering on conspiracy, forgery, obtaining by false pretense and criminal conversion, depositors’ funds to the tune of over N37.6 million.
One of the accused persons was found by the EFCC to have used his position as the Head, Operations and Transaction Service and Delivery, to collude with third parties and establish the syndicate which specialized in perpetrating fraudulent transactions and deductions.
Further investigations also showed that without the authorization or knowledge of the management of the bank, the defendants managed a fictitious fixed deposit account with interest accruing to it.
What they are saying
Head of Media, EFCC, Mr Wilson Uwujaren, disclosed that the anti-graft agency had prosecuted scores of bankers who had either swindled depositors or the banks in different cases.
He added that there were yet more cases pending in Federal High Courts in Port Harcourt, Rivers, Yenagoa, Bayelsa, Edo, and Lagos States, among others.
“What happens is that when a staff of the bank is involved in such activities, the bank takes the person out of the system through dismissal. But now, we are going after the banks and the personnel used to perpetrate fraud,” he said.
Banks must fine-tune their internal control processes to better protect their customers as their failure to do this would be costly.
Increasing use of mobile
Mobile adoption in Nigeria has risen over the last half a decade as the Central Bank’s policies on financial inclusions have increased reliance on mobile phones as a tool for conducting banking activities.
According to the latest data from the NIBSS, Mobile transactions in Nigeria (mobile & USSD) surged by 82.6% in 2020 to stand at 1.69 billion compared to 928.86 million recorded in the previous year.
Banks also earned a whopping N216 billion from digital banking transaction, buttressing just how critical mobile is to shoring up bank revenues.
Despite this heavy reliance on mobile as a strategic tool for financial inclusion, fraudsters are also benefiting just like the banks.
Banks earn N216 billion in E-banking income amidst threat from challenger banks
Nigerian banks raked in a sum of N216.52 billion from their e-business earnings in the year 2020.
Nigerian banks raked in a sum of N216.52 billion from their e-business earnings in the year 2020 as tier-1 banks popularly known as FUGAZ (First Bank, UBA, Access Bank, GT Bank, and Zenith Bank) topped the list of highest earners.
Income from digital channels is also classified as electronic business or banking income by the majority of commercial banks. Nairametrics gathered this research from the audited financial statements of 12 of the leading banks in the country. The same banks reported N217 billion in income from digital channels in 2019 dipping marginally by 0.24%.
- Banks attribute the reason for the drop in 2020 compared to 2019 to the revision of fees and charges for electronic transfers by the central bank in early 2020.
- On January 1st, 2020, the CBN ushered in a new regime for bank charges. While these mostly affected things like card maintenance fees, charge for hardware tokens it also affected the amount that can be paid for electronic transfers.
- For example, a graduated fee scale for electronic transfers replaced the current flat fee of N50 such that transfers below N10,000 now attract a maximum charge of N10; and transfers above N50,000, N50.
- USSD fees also got a cut a few months later announcing that customers will pay a flat fee of N6.98 per transaction every time they use USSD services with effect from Tuesday, March 16, 2021.
- The Covid-19 pandemic also played a major role in bank performance as it affected the expansion of the digital rollout plans earlier on in the year. However, the pandemic will swing in their favour as Nigerians increasingly relied on mobile banking for transactions while avoiding banking halls for fear of contracting Covid-19.
Banks and Digital Channels
Banks in Nigeria have increasingly resorted to generating income from digital channels such as their mobile applications, USSD channels, and online banking targeting Nigerians from all works of life. Efforts at increasing revenue from digital channels have been supported heavily by the Central Bank through initiatives such as BVN, POS, and other banking policies driving financial inclusion.
While the apex bank’s policy was aimed at reducing the number of unbanked in the country, banks have seized on the opportunity to offer a wide range of services that have increasingly provided an alternative source of income. According to NIBSS, the total value of electronic transfers for 2020 topped N158 trillion in 2020 a 50% growth when compared to 2019. Transaction volume also rose to 2 billion up 77% when compared to 2019.
Rise of Challenger Banks
Banks will face stiffer competition in 2021 as Challenger Banks such as Kuda Bank and V-Bank are more capitalized having attracted significant funding in recent months. These banks offer zero fees as an attractive selling point which they hope will sway customers from the big commercial banks who have long started monetizing their platforms.
Challenger Banks typically earn money from other sources such as providing bespoke services wrapped around savings and investments with their customers. Thus, rather than rely on digital revenues earned from fees and charges per transaction, they earn by actually engaging in the business of banking, lending depositors funds, and investing their free float.
Here are the top earners in 2020:
Apart from Access Bank, UBA, and FBNH, all the other banks posted year-on-year declines. For example, Zenith Bank and GTB recorded a 36% and 25% drop respectively.
However, Access Bank and UBA both recorded an increase of 56% and 14% respectively topping N56 billion and N44.2 billion respectively. Access Bank is now the largest bank making money from e-business income having topped FBNH which posted N48 billion from E-business income, the highest in 2019.
Fifth position – GT Bank (N11.77 billion)
Guaranty Trust Bank, the most capitalized financial institution listed on the Nigerian Stock Exchange generated a sum of N11.8 billion from its e-business unit, accounting for about 5.4% of the total e-business revenue in 2020.
- Its e-business revenue declined massively by 24.85% compared to N15.66 billion recorded in the previous year.
- The bank, however, posted a profit after tax of N201.44 billion in 2020 (second only to Zenith Bank), representing a 2.33% increase compared to N196.85 billion recorded in 2019.
Fourth position – Zenith Bank (N27.08 billion)
Zenith Bank earned a sum of N27.08 billion from its e-business in 2020 to stand fourth on the list behind UBA.
- Its income from e-business accounted for 12.5% of the total income generated by the twelve banks. Zenith Bank’s e-business income witnessed a huge plunge of 36.3% in 2020 compared to N42.5 billion it recorded in 2019.
- However, Zenith Bank posted the highest profit of N230.6 billion in the review period, growing its profit after tax by 10.4% from N208.8 billion recorded in 2019.
Third position – UBA (N44.25 billion)
UBA retained its position in third place with a total e-business revenue of N44.25 billion, accounting for 20.4% of the total e-business income generated by the banks on our list.
- UBA recorded a 14.14% increase in its e-business revenue in 2020 compared to N38.8 billion recorded in the prior year.
- UBA has also intensified its effort to build on its 2020 success by releasing a new mobile banking app, which aims to improve the ease of transacting by their customers.
- The tier-1 bank posted a profit after tax of N113.77 billion in 2020, representing a 27.7% increase compared to N89.09 billion recorded in the previous year.
Second position – FBN Holdings (N48.68 billion)
First Bank lost its first position to Access Bank, having increased its e-business revenue marginally by 1.35% to stand at N48.68 billion in 2020. Its e-business revenue accounted for 22.5% of the e-business income recorded by the twelve banks under consideration.
- Despite being one of the oldest banks in the country, First Bank has been at the forefront of the mobile banking revolution.
- The bank was one of the pioneers of the USSD platform which is used to transfer money via a text messaging application of a mobile phone and has continued to create products within the electronic space.
- For example, in November 2020, First Bank launched a Next Generation ATM, referred to as FastTrack ATM, designed to eliminate the need for physical interaction with the automated machine.
- This was as a result of the need to reduce physical contact with people and substances, due to the covid-19 spread in the country.
First position – Access Bank (N56.09 billion )
The largest bank in Nigeria by total assets toppled First Bank, Zenith, and UBA to occupy the first position with e-business revenue of N56.09 billion in 2020.
- Access Bank was in the fourth position in 2019 but catapulted to first as it grew its e-business income by a whopping 55.64% from N36.04 billion recorded in the previous year.
- This increase also translated to a 12.71% growth in profit after tax to stand at N106.01 billion in the review period from N94.06 billion recorded in 2019.
- Access Bank does mention that its E-business income includes earnings from its Channels business.
The increase in its e-business revenue is no surprise as the tier-1 bank spent a sum of N18.7 billion on IT and E-business related initiatives in the same year, as against N9.7 billion incurred in the previous year and N11.39 billion in 2018, a move that clearly translated to a boost in E-business income.
According to a recent article published by Nairametrics, Access Bank stated that it created 4 million digital loans in the year under review and disbursed N105 billion loans through its digital lending platform, indicating a 48% year-on-year growth.
- FCMB – N8.61 billion
- Union Bank – N7.04 billion
- Sterling Bank – N4.97 billion
- Stanbic IBTC – N2.74 billion
- Wema Bank – N2.61 billion
- Fidelity Bank – N2.46 billion
- Jaiz Bank – N214 million
The disruption caused by the covid-19 pandemic plunged into the revenue generated by Nigerian banks from their e-businesses, however, they were able to make up for it from their multiple streams of income which translated to a general stellar performance from the sector. It is worth noting that only Access Bank, UBA, and First Bank recorded growth in e-business income in the period under review.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
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- Infinity Trust Mortgage Bank Plc records a 60% increase in profit after tax in Q1 2021.
- Tantalizers Plc reports a loss after tax of N422.05 million in FY 2020.