Friday, 05 July 2019

In an effort to boost economic growth in Africa’s most-populous country, Nigeria is giving its banks a choice: lend more money, or hand it over to the central bank and earn nothing on it.

Banks should use at least 60% of their deposits for loans by the end of September, the central bank said on July 3, according to a circular viewed by Bloomberg. Those that don’t will have their cash-reserve requirements increased, meaning they’ll be forced to park more money at the central bank.

Nigeria’s banks are some of the most reluctant lenders in major emerging markets, with an average loan-to-deposit ratio below 60%. That compares with 78% across Africa, according to data compiled by Bloomberg. It’s above 90% in South Africa and about 76% in Kenya.

Guaranty Trust Bank Plc, the nation’s biggest lender by market value, fell 1.9% in Thursday trading, contributing the most to the Nigerian Stock Exchange All Share Index’s decline. Its loan-to-deposit ratio was 53% at the end of March. United Bank for Africa Plc also dropped, while Zenith Bank Plc rose.

The decision was taken “to ramp up growth of the Nigerian economy through investment in the real sector,” Ahmad Abdullahi, director of banking supervision, said in the letter to banks. “To encourage lending to small businesses and consumers and more mortgages, these sectors shall be assigned a weight of 150%” when computing the loan-to-deposits ratio.

The Nigerian economy is struggling to recover from a full-year contraction in 2016 and will expand 2.1% this year, according to the International Monetary Fund. The central bank cut its key lending rate in March to help boost growth.

Risk Aversion
There was previously no rule on minimum loan-to-deposit ratios, and many Nigerian lenders have ratios of about 40%, Abdullahi said by phone from Abuja, the capital.

The order came after Central Bank Governor Godwin Emefiele urged banks to boost lending or have access to risk-free assets restricted. Speaking at the most recent Monetary Policy Committee meeting in May, he said he would create “a mechanism” to limit banks’ purchases of government securities.

Risk-averse Nigerian banks have resisted lending to businesses and consumers and instead piled their cash into naira bonds, which yield 14.3% on average, one of the highest rates globally. Lenders worry that with inflation at more than 11%, extending more credit could endanger the financial system through an increase in non-performing loans, or NPLs.

That makes some analysts skeptical of whether the new measures will work.

“Forcing banks to lend under the current macro-economic situation will only result in a buildup in NPLs,” analysts at Lagos-based CSL Research, including Gloria Fadipe, said in a note to clients. “This could pose a risk to financial stability.”

CSL estimates it could result in an additional 1.4 trillion naira ($3.9 billion) of lending if the central bank gets its way.

Bad Loans
Non-performing loans as a percentage of total credit in the Nigerian banking industry declined to 11% in the first quarter from 14% a year ago, according to the National Bureau of Statistics.

Past experience with such measures isn’t encouraging. The central bank last year allowed banks to use their statutory cash reserves to fund manufacturers on the condition that such loans were at a maximum interest rate of 9% and a minimum maturity of seven years. The lenders didn’t take advantage of the policy due to credit risk and high returns on government bonds, according to Michael Famoroti, an economist and partner at Stears Business.

“I don’t expect much change,’’ Famoroti said by phone from Lagos. “We just came out from a period of high NPLs and banks are very cautious of credit growth at this time.”


Credit: Bloomberg

Published in Bank & Finance

A mystery person bought the 3,000-year-old quartzite head of Egyptian “Boy King” Tutankhamun off for $6 million Thursday in London auction, despite accusations from Cairo that it was stolen.

Christie’s auction house sold the 28.5-centimetre (11-inch) relic for £4,746,250 ($5,970,000, 5,290,000 euros) at one of its most controversial auctions in years.

No information about the buyer was disclosed.

The famous pharaoh’s finely-chiselled face — its calm eyes and puffed lips emoting a sense of eternal peace — came from the private Resandro Collection of ancient art that Christie’s last parcelled off for £3 million in 2016.

But angry Egyptian officials wanted Thursday’s sale halted and the treasure returned.

About a dozen protesters waved Egyptian flags and held up signs reading “stop trading in smuggled antiquities” outside the British auction house’s London sales room.

“This should not be kept at home. It should be in a museum,” Egyptian national Magda Sakr said.

“It is history. It is one of our most famous kings,” the 50-year-old said.

Egypt’s antiquities ministry said it would hold a special meeting at the start of next week to discuss its next steps in the standoff.

“The Egyptian government will take all the necessary measures to recover Egyptian antiquities that left Egypt illegally,” it said in statement.

Former Egyptian antiquities minister Zahi Hawass said by telephone from Cairo that the piece appeared to have been “stolen” in the 1970s from the Karnak Temple complex just north of Luxor.

“We think it left Egypt after 1970 because in that time other artefacts were stolen from Karnak Temple,” Hawass said.

The Egyptian foreign ministry had asked the UK Foreign Office and the UN cultural body UNSECO to step in and halt the sale

Published in Business

Eleven people were killed in an attack last week by an Islamist militant armed group in northern Mozambique near its border with Tanzania, Mozambican police said on Wednesday.

Several of the attackers from the Ahlu Sunnah Wa-Jama (ASWJ) group were later arrested, police added, referring to a militia operating in the gas-rich northern province of Cabo Delgado province since at least 2014.

Six people were wounded in the raid, said Orlando Mudumane, spokesman for Mozambique Police's General Command, adding that the arrested gunmen included both Mozambicans and foreigners.

"On 26 of June, 2019, a group of bandits perpetrated an attack in the village of Itole, in Palma District, killing 11 civilians; 9 Tanzanians and 2 Mozambicans," he said.

He dismissed reports the that deaths were by beheading, a method of killing used by the group in some previous attacks.

"All of them died of gunshot wounds, no beheadings. The defense forces combed the area and have already detained some elements of the group, foreigners and nationals."

Information about the attack has been scarce, with conflicting accounts from local and international media on the number of deaths and nature of the attack in the Muslim-majority region of the southern African nation.

Last week's ambush was the latest in a spate of execution-style attacks in the area since 2017 that have so far killed more than 100 people, while forcing hundreds to flee into the interior. Tanzanian security officials on Saturday also confirmed the attack and number of deaths, but were unsure of the identity of the suspects.

"The attack took place on June 26 in Mozambique where the Tanzanians had gone to work in paddy fields," Tanzania's police chief Simon Sirro said at a weekend briefing near the border.

"According to eyewitness accounts, unidentified gunmen raided the paddy farmers and carried out the attack."

Sirro said Tanzanian and Mozambique police had launched a joint investigation into the incident.

Mozambique on map

Impoverished Cabo Delgado, surrounded by dense forests and isolated villages, houses a growing clutch of multinational companies developing one of the biggest offshore gas finds in a decade - estimated to be worth at least $30 billion.

Whilst the attacks have mostly targeted civilians and government buildings, in February U.S. energy giant Anadarko said one worker was killed and several others injured in two attacks near the construction site for its massive liquefied natural gas (LNG) project in Cabo Delgado.

The attacks by the Ahlu Sunnah Wa-Jama, or "followers of the prophetic tradition", have drawn comparisons to Islamist groups in Tanzania, Somalia, Kenya and the Great Lakes region.

In common with Boko Haram in Nigeria, it touts a radical form of Islam as an antidote to what it regards as corrupt, elitist rule that has broadened gaping inequality.



Published in Economy
An association of Brazilian mining companies on Wednesday criticized some proposals made a day earlier by a Senate committee that spent months investigating the collapse of one of Vale SA’s tailings dams.
In a 400-page report, the Senate panel looking into the January disaster proposed a ban on new tailings dams, sought the phase-out of all existing tailings dams within 10 years and recommended harsher legislation for environmental crimes.
The dam in the town of Brumadinho, which contained tailings, the mud-like byproducts of mining, burst on Jan. 25, unleashing a torrent of toxic mud that killed at least 246 people, most of them buried alive.
The panel also asked for implementation of a 40% royalty charge on high-yield mines and recommended the indictment of several Vale executives, including the former CEO and the current CFO.
Wilson Brumer, president of the association known as Ibram – which includes Vale – said the proposals regarding dams and taxation need to be better evaluated, with specific studies before any implementation.
Senators were punishing the whole mining sector for one company’s mistakes, Brumer said. He also said the report would create legal confusion in the sector and could impact investment decisions.
“We don’t want to ignore what happened, it needs to be investigated. But let’s not mix up punishment with taxation,” he said.
Currently, mining activities in Brazil are subject to a royalty charge of 3.5% over gross revenue.
Regarding an overall decommissioning of all dams, Ibram says it could be very hard to carry out due to the diversity of the sector. Some smaller mining companies could not bear the high costs expected if the proposal were passed, it said.
Published in Business

Sudan’s ruling military council and a coalition of opposition and protest groups, on Friday reached an agreement to share power during a transition period leading to elections, setting off street celebrations by thousands of people.

The landmark agreement came after two days of talks following the collapse of the previous round of negotiations in the wake of a brutal military crackdown on June 3 that left dozens dead.

The two sides, which have held talks in Khartoum for the past two days, agreed to establish a sovereign council by rotation between the military and civilians for a period of three years or slightly more.

Aljazeera gathered that they also agreed to form an independent technocratic government and to launch a transparent, independent investigation into violent events in recent weeks.

The streets of Omdurman, Khartoum’s twin city across the Nile River, erupted in celebration when the news broke as thousands of people of all ages took to the streets, chanting “Civilian!

Published in World

Deposit Money Banks, DMBs, in the country can now operate mobile money wallets without getting approvals from the Central Bank of Nigeria, CBN, the apex bank has said in a circular on Thursday.

The bank however demanded that the banks maintain a 60% loan to deposit ratio to the real sector of the economy.

The CBN, disclosed this in a circular to DMBs with the title, ‘Operation of mobile money wallets by DMBs,’ on Thursday.

“The Central Bank of Nigeria remains committed to deepening financial inclusion in line with its objectives to achieve the national financial inclusion target of 80 per cent by 2020.

“To complement recent growth in the agent banking services under the Super Agent and SANEF initiative, and in recognition of the increasing demand for no-frills mobile money services, the CBN hereby directs that Deposit Money Banks shall henceforth not require prior approval to offer mobile money wallet services.

“DMBs are, however, expected to notify the CBN before the commencement of these services and are required to operate within the extant regulations on mobile money operations”, the CBN said.


The regulatory bank, in yet another letter to the DMBs, signed by the Director of Banking Supervision, CBN, Ahmad Abdullahi, titled, ‘Regulatory measures to improve lending to the real sector of the Nigerian economy’, it stated that, “All DMBs are hereby required to maintain a minimum Loan to Deposit Ratio of 60 per cent by September 30, 2019. This ratio shall be subject to quarterly review.

“To encourage SMEs, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose. The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories.

“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall of the target of the LDR.”

According to the apex bank, it would continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy.

Published in Bank & Finance
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