Category archives for: Banking

Kenya:Deal on Chase Bank Runs Into Shareholder Wall

By Allan Olingo

Three days before the Central Bank of Kenya made public its receipt of a non-binding offer from Mauritian lender SBM for Chase Bank, governor Patrick Njoroge sought to get the buy-in of stakeholders of the troubled financier.

After presenting details of what SBM Holdings Ltd, already a player in the Kenya banking scene after acquiring Fidelity Bank, Dr Njoroge invited questions from the audience, mainly depositors and shareholders.

It soon emerged that the offer would not be as readily accepted as he had hoped.

At issue was that the take it-or-leave it proposition would effectively allow SBM to cherry pick Chase Bank’s most promising accounts, leaving the depositors and shareholders at the mercy of borrowers who have since gone underground.

According to the CBK, SBM would buy only good loans and an equivalent value of deposits from Chase Bank, but not the entire business. If approved, Chase Bank would be effectively liquidated.

CBK told depositors that SBM would take up three-quarters of Chase Bank’s $723.87 million asset book or $543 million. More than 180,000 customers who joined the bank after it was placed under receivership would access their $56.2 million.

Another 3,100 large depositors who claim $543 million would be allowed to access a quarter of the funds ($135.72 million) through a current account and leave the remainder in a savings account. The latter amount would earn interest at seven per cent per annum but that its withdrawal would be restricted by SBM.

Half of the deposits, $275.45 million, would be placed as a term deposit earning an interest of seven per cent and only withdrawable over three years in equal tranches.

“The deal will allow depositors to access part of their money off SBM counters from January next year once we conclude this transaction by the end of December this year,” Dr Njoroge said.

The proposal has drawn opposition from depositors and shareholders, who term the offer discriminatory and effective liquidation of Chase Bank.

“The decision by CBK on how it will treat Chase Bank depositors who move to SBM and those that stay on in Chase Bank is unconstitutional. Depositors cannot be subjected to partiality. SBM should not be subject to any illegality or discriminatory action that will erode its credibility,” depositors told The EastAfrican.

At the depositor briefing, CBK revealed that Chase Bank has a negative equity of $333.3 million, part of which was $190.49 million in bad loans after some borrowers stopped repaying loans.

Imperial Bank

Meanwhile, the CBK has shortlisted three investors to acquire Imperial Bank, which is under receivership after evaluating the expression of interests (EOIs).

The investors should submit their formal proposal for the acquisition of the bank by January 15, 2018.

The investors would be granted access to a comprehensive confidential data after signing a confidentiality agreement to help them develop a formal proposal for the bank.

“The evaluation is now complete and a shortlist of qualifying investors has been identified,” CBK said in a joint statement with the Kenya Deposit Insurance Corporation.

CBK shut Imperial Bank on October 13, 2015, citing ‘unsafe and unsound’ business conditions to transact business at the mid-tier lender which had about Ksh58 billion ($580 million) in deposits.

-Additional reporting by James Anyanzwa

Nigeria:Southern Leaders Tackle Buhari Over Directive to World Bank

By Dapo Akinrefon

THE Southern Leaders Forum has lampooned President Muhammadu Buhari over directive to the World Bank to concentrate on the Northern region, saying such directive was discriminatory.

The forum said the directive, which was revealed by President of the World Bank Group, Jim Yong Kim, is sectional and divisive.

In a statement by Messrs Guy Ikokwu (South-East), Bassey Henshaw (South-South) and Yinka Odumakin (South-West), the forum faulted the Presidency’s response to the matter, noting: “The Presidency should be more nuanced, speak the language of persuasion and not behave as if it is at war with Nigerians.”

The forum, however, said the disclosure by the World Bank chief had raised the need to restructure Nigeria.

It said:”This gaffe has again raised the urgent need for the restructuring of Nigeria so that the constituent units of Nigeria do not have to struggle to control or pray for the mind of whoever is at the centre before they can witness development.

“This directive without mincing words is sectional, discriminatory, divisive and against the laudable promise of Mr President at his inauguration that he would not be beholden to anyone as he was elected to be the President of everybody.

“It riles the more when we have a situation of provocative deployment of “Operation Python Dance” and “Crocodile Smile” to a section of the country while the World Bank is being despatched to another.

“Giving instructions to the World Bank to concentrate on a section of the country where the President hails from throws a knife at the heart of our nationhood and challenges the hackneyed expression that the ‘unity of Nigeria is settled’.

“There can never be any rational explanation for why such a request should be made by a President with a pan-Nigerian mandate. The only explanation that would have convinced was if we were told that such a discussion did not take place at all.”

“We have also studied the very rude, bellicose, insensitive and knee-jerk response from the Presidency on the matter. The unfortunate tirade from the office of the President showed a very deep contempt and palpable impunity as 90% of its content was devoted to abusing those who have shown rightful indignation at such a development. It is not on record that even the British colonial masters addressed Nigerians in such scornful and brash language.

“The only tepid explanation in the spiteful statement was that the President’s request was for the reconstruction of the North East. But Kim was emphatic about “northern region” and not North East.”

Nigeria

Commissioner Points Hypertension, Diabetes As Major Causes of Blindness

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Ethiopia:Ethiopian Companies to Benefit From EIB Backing for U.S.$100m Private Equity Fund

press release

Luxembourg — The European Investment Bank (EIB) will support private equity investment across Ethiopia though support for the new USD 100m Cepheus Growth Capital Fund. The EIB’s USD 10 million participation represents the first backing for an Ethiopia focused fund and one of the first engagements with a single country private equity fund in Africa by Europe’s long-term lending institution.

“The European Investment Bank is committed to fostering private sector investment across Africa. Our first support for private equity in Ethiopia, through the Cepheus Capital Growth Fund, will help leading local companies to expand and succeed. The fund manager’s significant financial experience and understanding of Ethiopia will ensure companies can unlock their true potential. With this new initiative the EIB will help Ethiopia, the second largest country in Africa, to meet key sustainable development goals and continue its recent impressive economic growth.” said Ambroise Fayolle, Vice President of the European Investment Bank.

EIB Vice President Fayolle this week visited Ethiopia on a two day visit. During his stay in Addis Ababa he met business leaders, entrepreneurs and diplomats, as well as Ethiopian government officials and representatives of the Economic Commission for Africa.

“Private equity investment will strengthen the growth of leading companies in Ethiopia and create new jobs across the country. This new cooperation with Cepheus demonstrates the European Investment Bank’s commitment to Ethiopia and support for economic growth across the country in the years ahead.” said Ambassador-Designate Johan Borgstam, Head of the European Union Delegation to Ethiopia.

The Cepheus Growth Capital Fund, founded by two Ethiopian born partners, will invest in private sector companies all over Ethiopia involved in manufacturing, consumer goods, agriculture and agro-processing. The fund is expected to invest between USD 3 million and USD 10 million in each company. The EIB participation in the Cepheus Growth Capital Fund was approved by the EIB’s shareholders in September and is expected to be finalised in the coming weeks in conjunction with support from other international investors.

The expected first ever support for private equity investment in Ethiopia was announced in June this year during a visit to Addis by Pim van Ballekom, EIB Vice President responsible for operations in East Africa.

Cepheus Growth Capital is led by Managing Partner Berhane Demissie. The Addis Ababa based operations team with significant African experience in private equity, banking and fund management will manage direct investments. Its investment strategy is focused on job creation and supporting social improvement.

During his visit to Addis Vice President Fayolle also addressed the African Microfinance Week conference alongside Prime Minister Hailemariam Desalegn. The African Microfinance Week is a bi-annual major conference dedicated to development of financial inclusion in Africa and is supported by the EIB. More than 300 organisations were represented at this year’s conference that focuses on enhancing microfinance support for youth employment.

In recent years the EIB has supported investment to improve water infrastructure across Ethiopia and provided credit lines to back private sector investment. The EIB is currently finalising support for mobile banking in Ethiopia, it is also examining possible future backing of off-grid solar investment and financing for renewable energy projects and industrial parks.

Over the last five years the European Investment Bank has provided more than EUR 10.1 billion for investment across Africa.

Copyright European Union, 1995-2017

SOURCE European Investment Bank

Ethiopia

Ethiopian Airlines to Partner Tour Firms

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Nigeria:Does CBN Fund Govt Deficit With Treasury Bills Auctions?

By Henry Boyo

‘MY brother, Nigeria is managing debt not wealth because a big hole was dug in her pocket after the jamboree called FESTAC, 77. The TB is government borrowing to finance the deficit. If you understand public finance well, you will know it is the function of CBN to ensure the economy is well funded. So many of this your criticism of CBN do not add up in the context of Nigerian financial system which is why nobody in authority seem to pay attention to your criticisms and opinions. Have a nice day”

The above is a rejoinder from a ‘wiser’ reader to an article published recently in this column. The response of this columnist is as follows:

“I thank you for your above comments on the article, titled “Money, money, money everywhere but none to borrow” which was shared to your box.

In view of your illustrious pedigree in the banking community, it would be careless for anyone to hastily dismiss any comment you make with regards to that sector. However, please permit me to defer with your perception of the purpose of CBN’s Treasury bill auctions, which you described as “TB is government borrowing to finance (the) deficit”.

Instructively, any government borrowing, to fund annual fiscal deficits, is conducted on behalf of government by the Debt Management Office, (DMO). The CBN and DMO are independent government Agencies, with distinct constitutional mandates i.e the DMO borrows to fund government deficits, based on the loan requirement in approved annual Budgets; the CBN, conversely, mops up excess Naira liquidity to manage money supply and reduce the threat of inflation, as per its prime mandate for price stability, in addition to its responsibility for banking sector regulation.

I will be indebted to you for any authoritative literature that says anything different from the above. On receipt of such document, I will gladly surrender and confess my ignorance on this matter; infact I will on receipt of such authoritative enlightenment, immediately drop my 15 years old advocacy for monetary reform. I will also give you credit for this revelation, in the last article that I will write, to apologize for misleading readers of my column for so many years.

The CBN’s responsibility is clearly to manage money supply as distinctly spelt out in the enabling 2007 Act. CBN’s sole responsibility for this purpose, is in recognition of the terribly destabilizing consequences of surplus money, driving an irrepressible inflationary spiral that will decimate all income earners, impoverish the masses and make supposedly progressive economic plans unworkable.

Indeed, increasing national debt, with humongous bank profits, despite a prostrate real sector, the sleaze from multiple exchange rates, the emasculating impact of a weak Naira, high cost of funds and uncompetitive local production, and distortional fuel subsidies, are all symptoms of mismanagement of money supply, which unexpectedly, primarily benefit banks and other financial intermediaries, but certainly not the people.

It may interest you to know that after over 15 years advocacy, I have not received either formal or informal constructive rebuttal from any authoritative source, to challenge my widely canvassed observations. This is not because some people do not understand or know what I’m talking about, but it is just that strong interests (personal and corporate) are benefiting from CBN’s financial recklessness at the expense of people’s welfare.

The media have also invariably become largely compromised, that is why you find that, whenever they try to deceive the masses on the virtue of CBN’s Treasury bills auctions, all media houses repeat, word for word, the standard propaganda serially released by CBN that Treasury Bills “is government borrowings to help government fund its budget deficit and support commercial banks in managing liquidity” (see, for example, “CBN to borrow N917bn via T/bills in Q4”: Punch edition 14th September 2017, page 25). The question is why should CBN pay such a heavy levy fee to help the banks manage their own liquidity problem?

Evidently, Treasury Bills auction is the biggest fraud, perpetuated under the guise of monetary management in our country and in most African Economies to disenfranchise the masses.

How do you explain borrowing money at extortionist rates because money supply is in surplus? How can anything become more expensive when there is surplus supply? Worse still, the CBN readily admits that funds are borrowed for the purpose of removing excess money from the system, so the same CBN cannot turn around to re-introduce the same borrowed funds back into the system, as loans, to fund fiscal deficits; this is the job of the DMO, and as far as I know, the DMO does not borrow from the CBN.

Furthermore, how does one explain or justify CBN paying over 17% to borrow money that it has the authority to freely print. Why would the CBN that is supposed to adequately provide liquidity in the system, consciously and deliberately increase the cost of borrowing with higher MPRs, which then push the real sector into a hard place, to constrain their cost competitiveness against imports. Why would anyone pay interest of even 1% on funds that will simply be sterilized, when infact, in successful economies everywhere, this has become an abomination, as Central Banks actually charge Money Deposit banks, a small interest for warehousing their surplus funds.

I thank you for reading this message, this far.

WISER ONE’S RESPONSE TO ABOVE:

“My brother Thanks. Let me start by stating that your write ups are not in the context of Nigerian Financial system. In my undergraduate days at UNN, I took a course in Nigerian Financial System. Apart from Monetary policy to stabilize the economy and reduce inflation, the CBN had development functions, Nigeria being a developing economy. The CBN is also a financial adviser to the Federal Government in addition to issuing Naira and managing foreign exchange in and out of Nigerian.

Treasury Bills is a debt instrument of Federal Government with tenure of 91 days, 180 days and one year. Thus CBN is the issuing house for Federal Government. Thus while DMO is issuing house for medium and long term securities, CBN is issuing house for short term securities. I did not specifically mention that CBN securities are used to fund budget deficits.

What I said is that Nigeria is managing debts rather than wealth through the CBN, and like you observed also through DMO. I suggest you read Functions of CBN in Money and Banking in Nigeria by Prof W O Uzoaga and Nigerian Financial System by Prof G O Nwankwo. That way you will tailor your write ups to Nigeria’s perculiar situation. Thanks for granting me this audience”.

Columnist rejoinder: No further comment.

SAVE THE NAIRA, SAVE NIGERIANS!

Kenya:SA Hotel Chain’s Sh384 Million Locked in Chase Bank

By Victor Juma

South Africa’s hotel group City Lodge has Sh384.8 million locked up at Chase Bank, the international hotels chain has disclosed.

City Lodge, which owns Nairobi’s Fairview Hotel and Town Lodge, says in its latest annual report that the deposit was significant enough for its recoverability to be considered a key audit matter.

“The group, through a wholly owned subsidiary, has deposits with Chase Bank (Kenya) Limited amounting to Sh384.8 million at year-end,” City Lodge says in the report.

“The group’s ability to access the deposits is restricted and due to uncertainty about whether the deposits are fully recoverable given the receivership process, an impairment of R24 million (Sh182 million) has been recognised at year-end.”

The multinational, which is also building another hotel at the Two Rivers Mall shopping complex, says the amount written off is an estimate of recoverability of the deposit based on available information about the progress of the receivership as of June.

City Lodge’s external auditor, KPMG, says the locked-up cash was considered a key audit matter because of the level of judgment involved in determining the recoverable amount of the deposit and the subsequent impairment.

The multinational has since classified the cash deposit as “other investments” in its financial statements.

Chase Bank went into receivership on April 7, 2016 and re-opened on April 27, 2016 under the management of the Kenya Deposit Insurance Corporation.

The Central Bank of Kenya (CBK) recently announced that Mauritius’ SBM Holdings has made an offer to acquire the lender, raising hopes that depositors could recoup their cash.

SBM has reportedly proposed to assume liability for 75 per cent of the deposits, with payments expected to start in January. The payouts will, however, be staggered over the medium term.

“CBK … assesses that SBM’s non-binding offer represents a viable proposal for the substantial resolution of Chase Bank, for the benefit of depositors and the strengthening of the Kenyan financial sector,” the regulator says in a statement.

“If agreed, it is expected that the proposed transaction will be concluded by the end of 2017.”

Ex-Chase Bank chair accuses Deloitte of insider loans error

Kenya

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Nigeria:Bad Loans in 14 Banks Hit N177 Billion in 6 Months

By Peter Egwuatu

The economic recoveries witnessed in the first half of 2017 did not shield the banking sector from some adversities in the form of rising bad loans. Industry stakeholders have said that the impact is still being felt negatively as banks’ customers were not able to meet their financial obligations on loan repayment, resulting to 14 banks booking N177.3 billion impairment losses for the period.

The banks are: United Bank for Africa, UBA Plc, Fidelity Bank, Access Bank Plc, Stanbic IBTC, Ecobank Group, Zenith Bank Plc, GTBank Plc, and Diamond Bank Plc. Others are, Sterling Bank Plc, FCMB Plc, Wema Bank Plc, Union Bank Plc, FBN Holding Plc, and Unity Bank Plc.

However, the growth rate appeared less agitating at 3.6 per cent from N171.243 billion in the corresponding period of 2016, when compared to the net interest income of the 14 banks which stood at N797.567 billion, representing a growth of 28.7 per cent from N619.517 billion recorded in the corresponding period of 2016.

Financial Vanguard review of the banks’ performance with regard to the impairment losses and the interest income showed that the 14 banks recorded credit losses of 22.2 per cent of the net income realised in the period under review. Ecobank Group recorded the highest impairment losses of over N40 billion, while Zenith Bank recorded the highest income in the six months period.

Further analysis showed that First Bank recorded no impairment loss with low interest income, while Fidelity Bank recorded the least impairment loss of N4.81 billion.

Meanwhile, top five banks on impairment losses for the period under review showed that Ecobank recorded N49.016billion representing a growth of 54.3 per cent from N31.764 billion in the corresponding period of 2016; it was followed by Zenith Bank with N34.512 billion, showing a growth of 196 per cent. Diamond Bank recorded N20.312 billion, representing a growth of 6.9 per cent from N18.998 billion, followed by Stanbic IBTC, which recorded N13.953 billion, representing a growth of 65.1 per cent and Unity Bank recorded N11.227 billion, showing a drop of 37 per cent from N17.833 billion in 2016.

The top five banks on net interest income for the six months period ended June 30, 2017 showed that Zenith Bank recorded N144.165 billion, representing a growth of 48.3 per cent from N97.231 billion recorded in the corresponding period of 20116; it was followed by Ecobank recording N142.739 billion, showing an increase 18.8 per cent from N120.109 billion in 2016, UBA recorded N101.379 billion, representing a growth of 58.1 per cent from N64.132 billion.

Access Bank followed on the chart with N83.042 billion, showing a growth of 21.3 per cent from N68.451billion and GTBANK recorded N63.408 billion, indicating a growth of 65.5 per cent from N38.321billion.

Stakeholders’ reactions

In his reaction to the rise in loan losses, Managing Director, High Cap Securities Limited, Mr. David Adonri, said: “Non Performing Loans, NPL are mounting because borrowers are yet to recover from the economic crisis. Interest income for most banks is mainly from public sector lending which is at high interest rate. For 14 banks to suffer such impairment, it means that there is danger looming.”

The spokesperson for Independent Shareholders Association of Nigeria, Mr. Moses Igbrude said: “The implication of increase in loan losses provision is that these banks’ customers default in loan repayment is on the increase, which invariably will lead to low or no returns to the shareholders at the end of the financial year. It is a sign that the loan facilities given are not performing and it has a grave consequence on the banking industry, which means danger looming in the sector.

“Managements should device ways of monitoring all processes of giving out loans. Government should try to improve the economy by diversify the economy away from oil. They should provide a favourable forex market. Government policies should be consistent with what they preach. They should focus on local production, especially agriculture so that Nigeria can feed itself as a nation. Government should encourage export by paying for the EEG (Export Expansion Grant) as they promised the exporters. They should pay local contractors. Also federal and state governments should pay their workers regularly. This will jump-start the economy and raise the purchasing power of the people. Then the NPL will reduce and banks impairment losses will reduce.

In his comment, former National Publicity Secretary of Nigeria Shareholders Solidarity Association, NSSA, Alhaji Gbadebo Olatokunbo, said: “The reasons for these NPL is well known. Some of the NPL comes from loans to telecommunication/oil companies and others, while most of the companies if not all were performing.

“But we also know that the regulatory agencies would force them to make provisions. So both the banks and their debtors are going-concerns; Therefore, there is no cause for alarm as the capital would be recovered either now or later.

“The implication of these is that investors should brace up for the results of a bad economy, although, investors invest in the market for a long term, and don’t forget that the banks are making cool profits in other areas of their operations and some if not many banks will still deliver but not as much as expected. This means that we may have good dividends, but not bumper-harvest-dividends

“We should note that Nigeria just got out of recession and inflation is a by-product of bad economy. It will take some time to fix and improve bad economy and as it improves, then inflation would be tamed. One very bad attitude of we Nigerians is that we so much believed in miracles, which doesn’t work with the economy. Economic policies must be well formulated and executed to impact on banks performance.

“We’ve been down economically and so government must follow the due process, with serious improvement in the implementation of good policies in order to achieve a good result and it will take some time to get the economy back on track and never through miracles; while the citizen must be seen to be supporting the economic recovery agenda.”

Impairment losses

Mr. Oderinde Taiwo, National Coordinator, Proactive Shareholder Association of Nigeria, PROSAN, said: “It is really not good for the banking sector as impairment losses is on the increase. It is an indication that banks’ customers are not honouring their promises which could be linked to liquidity problem. Government need to inject money into the economy to improve business activities.

“The implication to stakeholders in these banks is that it will affect the bottom line at the end of the financial year and invariably affect return on investment. Shareholders should not expect higher divided except if some of these NPLs are recovered.”

Nigeria:World Bank – We Have Over $8.5bn Investments Scattered Across Nigeria

World Bank Group said it has an investment portfolio of about $8.5 billion scattered across states and regions in Nigeria.

The Senior Communications Officer, World Bank Nigeria, Olufunke Olufon, said this in a statement issued in Abuja yesterday.

She said the investments were to assist the 36 states of the federation and the federal capital territory (FCT) to reduce poverty and foster prosperity.

Olufon, according to The Cable, noted that the explanation followed concerns raised by Nigerians over the comment by World Bank President, Jim Yong Kim that President Muhammadu Buhari asked the bank to shift its intervention focus to north-eastern states.

She said the bank was also working with federal and state governments, as well as development partners on speedy delivery of critical interventions to people of the north-east which urgently needs assistance.

“In 2015, the government of Nigeria requested World Bank support to respond to the humanitarian and development crisis in the north-east of Nigeria,” the statement read.

“To assess the needs of the nearly 15 million people in the region impacted by the crisis, the World Bank Group, the UN and the European Union carried out a Recovery and Peace Building Assessment (RPBA).

“And based on the findings of the assessment, World Bank’s 775 million dollars support to the north-east focuses on restoring basic education, health services, agricultural production, and livelihood improvement opportunities.”

Olufon added that the World Bank Group was doubling its resources to address fragility, conflict and violence at the subnational and national levels and help to stabilise places that were affected by high poverty and influx of people.

Nigeria

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Nigeria:Niger Gov Commends Appointment of Aisha Ahmed for CBN Post

Niger State Governor, Alhaji Abubakar Sani Bello, has charged the newly appointed Deputy Governor of the Central Bank of Nigeria (CBN), Hajiya Aisha Ahmed, to be above primordial sentiments and work for the overall interest of the country.

The governor, in a statement issued by his Chief Press Secretary, Malam Jibrin Baba Ndace, described her appointment as well deserved, stressing that it is the result of hard work, dedication and resilience in the discharge of her official responsibilities.

“Your competence and ability is not in doubt, however we advice you to be a good representative of the state, lift yourself above primordial sentiments and work for the overall good of the country.”

Bello noted that the appointment of Ahmed to the apex bank was not only the hallmark of her chosen career , but that it has further elevated the status of women in a predominantly male dominated society.

He also stated that the appointment would serve to encourage women, the girl-child and youth in the country to aspire to become what they want to be in their chosen career without hindrance.

“Your appointment is no doubt a morale booster to the girl-child, women and youths in Niger State in particular and Nigeria in general. Your elevation has shown that hard work and dedication to chosen career pays.”

He charged the newly appointed CBN deputy governor to leverage on her position and assist the state government in attracting genuine investors and development partners to the state.

“We will work closely with Ahmed and tap into her wealth of knowledge and experience, as a professional and technocrat, to further maximise on the potentials of the state.”

The governor expressed confidence in the ability of the National Assembly (Senate) to clear Ahmed, adding that the nominee/appointee is competently qualified for the new position.

A holder of the Master of Science, MSc in Finance and Management from the Cranfield School of Management in the United Kingdom, Mrs. Ahmad, an accounting graduate from the University of Abuja, also has a Master of Business Administration, MBA in finance from the University of Lagos.

Ahmed, 40, has been actively involved in banking at the top level for most part of the last 20 years, either as a banking executive or investment adviser on retail banking, wealth management, consulting and financial advisory.

Nigeria

Obasanjo, Yar’ Adua, Jonathan Accidental Leaders – Na’abba

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Nigeria:Emefiele – CBN Will Not Rest Until Nigeria Achieves Sustainable Growth

interview

Central Bank of Nigeria Governor, Mr. Godwin Emefiele has assured Nigerians that the central bank will continue to implement policies that would help the economy attain sustainable growth. Emefiele, who said this while receiving the Forbes’ 2017 ‘Best of Africa Achievement’ award in Washington D.C., also urged global investors to come and invest in Nigeria. Kunle Aderinokun, Chika Amanze-Nwachuku, Obinna Chima and Nume Ekeghe present the excerpts:

Recalling the Turbulent Times

I want to thank Forbes for finding me worthy of receiving this award on behalf of the Central Bank of Nigeria tagged: “Best of Africa”. But I think what is most important here is to thank Nigerians for standing with us particularly during the very difficult times. I say difficult times then, although I make bold now to say we are out of it.

Like you all know, the last three years have been tumultuous not just for Nigeria, but the global economy, arising largely from the external shocks that hit, particularly the commodity exporting countries.

The shocks no doubt led to the plummeting of Nigeria’s reserves as crude oil price fail to a point where it dropped by February 2016 to as low as $28 per barrel. If you compare this price to the time when it averaged $100 per barrel for five straight years from 2009 to middle of 2014, you will all agree with me that we have gone through a lot.

Another shock that hit Nigeria like other countries was the United States normalisation to the point that in the last quarter of 2016, about $40 billion left emerging and frontier markets back to US.

Geo-political tensions also affected flow of funds, including Nigeria and these climaxed when we recorded negative growth. It also got to a point in the third quarter of 2016, where we got negative 2.3 per cent. We also saw inflation hitting us badly. By January 2016, inflation was just nine per cent, but by January 2017, prices have gone up and inflation had hit us up to 18 per cent and Nigerians no doubt became uncomfortable.

We, at monetary policy committee, felt that at this level, something needed to be done. In a study at CBN, we came to a conclusion that at the level it would be difficult to stimulate growth. So we decided to take inflation head on. We are happy today that we are doing about 16 per cent now and will be tamed with other policies in place.

It is also important to talk about what happened to our reserves. By June 2014, Nigeria’s reserves stood at about $37 billion. As a result of the shock, by October 2016, with all the measures we have taken, it dropped to about $23 billion. We felt that having taken all the measures so far -currency adjustments three times, from N155 to N168 to N197 and above N200- and February this year, a section of the market hit N525- we said something had to be done. But I am happy today that we are here. We also want to thank our friends, who have shown confidence in us. The foreign investor community has also been very supportive. We took some of the decisions that they didn’t like, but I know that we have taken one this time around that excited them. The opening of the investors and exporters fx window has been particularly exciting to them.

Where We are Today

And I must say that in six months, we have seen about $10 billion in inflows into Nigeria as a result of the opening of that window. We feel so grateful to them for showing the confidence in Nigeria again. But I think all this also is because President Muhammadu Buhari has always said that: we had unfortunately been hit by this exogenous shock and it had resulted in inflation and plummeting in reserves, but that we needed at some point to look at the items Nigeria imports into the country.

Nigeria is a big market, no doubt, 180 million people growing at an average population rate of three per cent annually. It is certainly a big market. But then, it is important to cast our mind back and begin to ask ourselves: There was a time in Nigeria when we produced everything we were eating. We were producing rice, palm oil etc. Nigeria was the highest producer and exporter of palm oil in the world with over 40 per cent market share sometimes in the 60s and 70s. But unfortunately because we found oil, we decided to take things easy. What we are saying is that: the President said we had tested this before, we had done it before, it is not about re-inventing it again.

Still on the 41 Items

Our climate is good, let us fold our sleeves and begin to feed ourselves again, and save our reserves for some of those items that we cannot produce as a country. And that has led to where we are today. We are delighted we put forex restriction on 41 items. We were castigated and I was reading in the Economist magazine that what we did was to just move around the home and pick items including toothpicks. I think it is important to know what we are doing. If you go to China, where they are producing the toothpicks, those things can be produced in a place that is less than a quarter of a room. How much does it involve to invest in the equipment that is used in producing toothpicks. We were importing toothpicks. Bamboo is what is used in producing toothpicks. And there is a company in Nigeria today, where people come out of school and are now producing toothpicks, creating jobs for our people. That is what is found in the spirit of Nigerians. A couple of weeks ago, I picked up a toothpick that is being produced by a Nigerian. That toothpick is stronger than the one that is being imported from China. But I think as far as we are concerned, it is about creating jobs for our people. Nigeria is the largest producer of cassava. We were importing starch and glucose. Nigerian companies that could produce starch and glucose would go to companies that needed starch and glucose and all the companies were telling them was our stock levels are high. They said they would visit them when their stock levels go low. But unfortunately, their stock level did not go low until we imposed the forex restriction on these items. Their stock level went low and they started to now patronise Nigerian companies that were producing starch and glucose. Today, companies that require starch and glucose for their pharmaceuticals and formulations patronise Nigerians. This has created jobs for us. That is the spirit of Nigerians. This is part of the reasons the President said we needed to patronise Made-in-Nigeria and I am happy that we are doing this. But I think it is also important that we thank everybody, particularly Nigerians.

Exiting Recession

Yes, we have just managed to exit the recession with a fragile growth of 0.5 per cent; we have seen inflation trending downwards, we have seen exchange rate and reserves looking stronger and firmer. But I think we are determined to continue to push further to see to it that Nigeria returns to its historical growth path. 0.5 per cent or two per cent is not the historical growth path for Nigeria. Nigeria is a country that must grow at a rate that is at least twice the population growth rate (six per cent or seven per cent). And until we achieve that, we are not going to rest on our oars. To see that Nigerians are happy again and that we grow the country. God has bestowed us as leaders; he has given us the opportunity to serve our people. God has put these in our hands and we do owe them the responsibility to ensure that we put policies in place that will make Nigeria good for everybody. We want to continue to join hands with our friends in the foreign investment community to do that.

Nigeria Ripe for Investment

Nigeria has a lot of potential. The environment is good, the climate is good. Nigerians are hospitable and good people. That is why we make bold to say Nigeria is good for business. There are very big countries in the world you will visit today and say you want to invest. The returns are not as high as you have in Nigeria. We want to invite you and that for me is the message we have here today. Come to Nigeria, Nigerians will receive you. Come to Nigeria, you will be happy in Nigeria. We are battling with unemployment in Nigeria, and that is the reason again the President called on the Federal Ministry of Agric, CBN, Minister of Employment, Labour and Productivity, and some important stakeholders including the governors together and said there is a need to start thinking about how we can create jobs for our people through agriculture; that agric should not be seen as business that is meant for the poor, that you can make money from agriculture. Countries that have progressed have done so because they took the agric sector very seriously. We are determined to make agric the sector where people make money and we have decided to put in place the Anchor Borrowers Programme. Before we introduced the ABP, farmers go to farm rice and all the yield they were getting was one to 1.5 metric tonnes per hectare. After we started the ABP, today we are beginning to see farmers getting yield as high as eight metric tonnes per hectare, reducing their costs and making it possible to make their money in rice cultivation. We have seen that there is a need for us to think about how we improve the wealth of our rural community. We started that journey and through rice, we have achieved that. The Nigerian government is confident that through agriculture, the wealth of our people can be boosted. And that is the journey we are on. We want to invite all of you, our friends and foreign investor friends; I heard the President of the Corporate Council for Africa talked about the fact that there are foreign investors that are interested in agriculture in Nigeria. We welcome you. Come, Nigeria will receive you.

Nigeria:CBN Pumps $306 Million Into Forex Market

By Obinna Chima

Players in the retail segment of the Nigerian interbank foreign exchange (forex) market received a $306.3 million boost from the Central Bank of Nigeria (CBN) on Friday, following bids received from forex dealers by the Bank.

This is just as the naira appreciated by 21 kobo week-on-week to close at N360.43 kobo on the NAFEX.

The central bank on Friday indicated that the deals in the retail window represent requests from the various sectors in the Secondary Market Intervention Sales (SMIS), thereby providing a boost to the respective sectors.

The Acting Director, Corporate Communications Department, Mr. Isaac Okorafor, revealed that the central bank would continue to increase liquidity based on genuine demands in the market to enhance forex stability.

He reminded Nigerians that the CBN had kept faith with its resolve to sustain liquidity in the forex market and that the Bank had ensured that pressures on the market were removed by its continuous interventions.

But the naira exchanged at an average of N364 to a dollar on the Bureau de Change (BDC) segment at major trading points in Lagos, Abuja, Port-Harcourt and Kano.

While receiving his Forbes’ 2017 ‘Best of Africa Achievement’ award in Washington DC last week, CBN Governor, Mr. Godwin Emefiele, disclosed that in the past six months, Nigeria has seen about $10 billion in inflows through the Investors’ and Exporters’ (I & E) window.

He commended foreign investors for showing the confidence in Nigeria once again.

“But I think all this also is because President Muhammadu Buhari has always said that: we had unfortunately been hit by this exogenous shock and it had resulted in inflation and plummeting in reserves, but that we needed at some point to look at the items Nigeria imports into the country.

“Nigeria is a big market no doubt, 180 million people growing at an average population rate of three per cent annually. It is certainly a big market. But then it is important to cast our mind back and begin to ask ourselves: There was a time in Nigeria when we produced everything we were eating.

“We were producing rice, palm oil etc. Nigeria was the highest producer and exporter of palm oil in the world with over 40 per cent market share sometimes in the 60s and 70s. But unfortunately because we found oil, we decided to take things easy. What we are saying is that: the President said we had tested this before, we had done it before, it is not about re-inventing it again,” Emefiele explained.

Nigeria

Obasanjo, Yar’ Adua, Jonathan Accidental Leaders – Na’abba

The former Speaker of the House of Representatives, Hon Ghali Umar Na’ Abba has said that all the leaders that had… Read more »

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