As the 2019 General elections draw near in Nigeria, some commercial banks plan to cut lending to avert risks, Ike Chioke, Managing Director, Afrinvest West Africa Limited, has said.
Chioke made the disclosure while releasing the 2018 Nigerian Banking Sector Report in Lagos on Tuesday.
The development is coming in spite of the promise by the Central Bank of Nigeria (CBN) to support banks that fund projects in the agriculture, manufacturing, and other related sectors that are employment and growth stimulating to the economy by refunding Cash Reserve Ratio (CRR) at a single interest rate of 9 percent per annum.
The CBN had said the effort under the differentiated CRR regime was part of measures aimed at increasing the flow of credit to the real sector of the economy in order to consolidate and sustain the nation’s economic recovery
But according to the Managing Director of a Lagos-based investment and research firm, lenders are already cutting loans to key sectors of the economy to reduce the political risks and ensure safety of their funds.
“The political environment is heating up, new alliances are emerging and defections across the biggest parties have punctuated the polity.
“These events are evidence of the prevailing political risk factor in Nigeria, creating uncertainty in the environment, with potential impacts on business and investor confidence,” Chioke said.
He added that the election fears have contributed to the decline in the Foreign Direct Investment (FDI) inflow into the country as some of the investors are caution against the polls.
The Managing Director forecast that with the expected recovery in the non-sector which reflected in the nation’s Q2 Gross Domestic Product (GDP) report, Nigeria’s economy would reach 2.1 percent in 2018.
His outlook is 0.5 percent points from 2.6 percent earlier projected for the nation’s growth.
“To achieve this, we believe that increased spending ahead of the 2019 elections will support non-oil sector activities, while increased oil output due to an additional 0.2 million barrels per day from the Egina Oil Field will drive oil sector growth,” he said.
In August, a $3.3 billion worth Egina Floating Production, Storage and Offloading (FPSO) had sailed from LADOL Island in Lagos to its oil field located in Oil Mining Lease (OML) 130 located some 130 kilometers off the coast of Nigeria at water depths of over 1,500 meters.
The oil field was projected raise Nigeria’s crude oil production by 200,000 barrels per day, an approximate of 10 percent of the country’s total oil production output, when it comes on stream in December.
The project, built by Samsung Heavy Industries of Korea (SHI) for the Egina oil field was primarily operated in Nigeria by the global oil giant, Total, at a cost of $16 billion.
Source: The Ripples
The Central Bank of Nigeria (CBN) governor, Mr Godwin Emefiele, says maintaining stable exchange rate to avoid depreciation of the Naira is better than building foreign reserve buffers.
Emefiele told newsmen on Sunday that this was part of the outcome of the Nigerian delegation’s meetings with investors and institutions at the International Monetary Fund (IMF) and World Bank Group (WBG) Annual Meetings in Bali.
He said that all frontiers and developing markets have suffered not just depreciation, but had also lost reserves.
“We are very conscious of the need to build buffers but unfortunately I must say that we are in the period where it will be difficult to talk about building reserve buffers.
“We can only build reserve buffers if we want to hold on to the reserve and then allow the currency to go, and wherever it goes is something else.
“So it is a choice we have to make and at this time the choice for Nigeria is to maintain a stable exchange rate so that businesses can plan and we do not create problems in the banking system assets.”
According to him, like other emerging markets nations, Nigeria has also lost reserves but only marginally because it had managed to sustain stability in its foreign exchange market.
The CBN governor said that the IMF and the World Bank advised that nations should build country specific policies and fiscal and structural reforms that would boost economic growth.
Mrs Zainab Ahmed, Minister of Finance, said the World Bank’s Human Capital Development Index (HCI) ranking, which placed Nigeria low at 44 per cent on stunting, was disheartening and depressing.
She, however, said that the Federal Government saw the rating as a wake-up call.
“We admit that this pervasive action was due to long years of under-investment in human capital, which we have before now realised and for which we have been addressing.
“Apart from major policy actions, some decisive actions are being taken to address the situation.”
According to her, the delegation held meetings with the two rating agencies-Fitch and Moody’s and presented to them the summary and synopsis of the recent economic and financial developments in Nigeria.
She added that it was an opportunity for the rating agencies to be able to objectively evaluate Nigeria’s credit.
Ahmed said she also met the IMF Managing Director, Ms Christine Lagarde and discussed Nigeria’s economy in view of the 2019 general elections.
She assured Lagarde that the election year would not pose any threat to the nation’s economic prospects.
Mr Udoma Udo Udoma, Minister of Budget and National Planning, said that to improve HCI, the nation had improved budgetary allocation to health and education.
He said that allocation to education moved from N22.5 billion in 2015 to N102.9 billion in 2018.
He added that allocation to health was reviewed from N26.6 billion in 2015 to N86.49 billion in 2018.
He said also that N55.19 billion had been added to the health budget in 2018 through the National Health Act.
The Naira on Thursday appreciated marginally against the dollar at the Investors’ Window (I & E), exchanging at N363. 57, stronger than N363.94 posted on Wednesday.
The daily market turnover stood at 392.9 million dollars.
The Nigerian currency closed at N306.40 to the dollar at the official CBN window.
At the parallel market, the Naira closed at N359 to the dollar, while the Pound Sterling and the Euro closed at N478.30 and N420.
Trading at the Bureau De Change(BDC) segment saw the Naira close at N360 to the dollar, while the Pound Sterling and the Euro closed at N478.30 and N420.
Meanwhile, in spite of the continuous intervention by the Central Bank of Nigeria (CBN) at the foreign exchange market and the increase in the price of oil at the international market, the manufacturing sector witnessed slow growth in the month of September.
The manufacturing sector continued to expand in September, though at a slower pace, the latest CBN Manufacturing Purchasing Managers’ Index (PMI) report, shows.
It showed that the September Manufacturing PMI eased to 56.2 from 57.1 in August, indicating expansion in the manufacturing sector for the 18th consecutive month.
The report noted that “a composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.”
The Nigerian National Petroleum Corporation (NNPC) has denied media reports alleging that the Nigeria Police Force (NPF) recovered $470.5 million and N8 billion of the corporation’s funds hidden in commercial banks.
It said it runs a transparent account which the Presidency, the Office of the Accountant-General of the Federation (AGF) and the Central Bank of Nigeria (CBN) were fully aware of and receive periodic status reports on balances yet to be remitted to Treasury Single Account (TSA) by commercial banks.
The Nigeria Police Force had claimed that the monies belonging to NNPC Brass Liquefied Natural Gas were hidden in some commercial banks and not remitted to the treasury single account in violation of the Federal Government’s directives.
According to the police, “The sum of Four Hundred and Seventy Million, Five Hundred and Nineteen Thousand, Eight Hundred and Eighty-Nine US Dollars and Ten Cent ($470,519,889.10) belonging to NNPC BRASS/LNG INVESTMENT hidden in some commercial banks after the directives of the Federal Government on TSA.
“The sum of Eight Billion, Eight Hundred and Seven Million, Two Hundred and Sixty Four Thousand, Eight Hundred and Thirty-Four Naira, Ninety-Six Kobo (NGN8,807,264,834.96) monies belonging to NNPC BRASS/LNG INVESTMENT, that was not remitted to TSA Account of the Federal Government was also recovered,” the Police had said in a statement.
But in a statement issued on Friday by NNPC Group General Manager, Group Public Affairs Division, Ndu Ughamadu, the corporation said although a few commercial banks were yet to complete remittance of US dollar deposits to the TSA, it noted that it had no funds hidden in any commercial bank.
The state oil firm explained that the allegation was not only misplaced but equally misleading.
According to Ughamadu, following the implementation of TSA, the corporation had made a report to the Presidency on the failure of some commercial banks to complete transfer of US dollar deposits and a Presidential directive was issued for CBN to ensure that the funds were completely transferred to the corporation’s TSA in US dollars.
“Most of the commercial banks have since complied with the Presidential directive and completed transfer to the Corporation’s Treasury Single Account in US dollars, including the reported $470.5 million.
“On the purported recovery of N8 billion by the Nigeria Police Force, the Corporation is not aware of any change in the subsisting Presidential directive to the effect that all of the US dollar balances must be transferred to NNPC’s CBN Treasury Single Account in US dollars in addition, no such funds have been deposited into the Corporation’s CBN Treasury Single Account.
“Consequently, NNPC’s record of the US dollar funds still yet to be transferred by a few commercial banks cannot reflect the said recovery.
“While the Central Bank of Nigeria executes the Presidential directive to ensure complete transfer of US dollar funds to the Corporation’s CBN TSA, it is pertinent to reiterate our earlier position that NNPC will resist every attempt to subject these funds, which have been in the full view of Government, to five percent whistle blowing fees as this would be unreasonable and a sheer waste of public funds,” he said.
The Central Bank of Nigeria (CBN) has continued its intervention in the retail Secondary Market Intervention Sales (SMIS) by injecting a total of $317.52million in that segment of the market in addition to CNY58.40 million in the spot and short-tenored forwards segment.
The figures obtained from the apex Bank on Friday revealed that the US dollar-denominated interventions were only for actors in the agricultural and raw materials sectors while the Yuan was for Renminbi denominated Letters of Credit.
Confirming the figures, the CBN’s Director, Corporate Communications Department, Mr. Isaac Okorafor, said the Bilateral Currency Swap Agreement (BCSA) with the Peoples’ Bank of China had continued to receive encouraging responses from customers.
While noting that Friday’s sale was the fifth in the series of interventions, he said the BCSA was achieving its major objectives of reducing the use and influence of a third currency transactions; reducing the pressure on the naira exchange rate; easing trade transactions between Nigeria and China and maintaining financial market stability in Nigeria.
Mr. Okorafor further assured that the CBN would remain committed to ensuring that all the sectors of the foreign exchange market continue to enjoy access to the needed foreign exchange by Nigerians.
It will be recalled that the Bank on Tuesday, September 18, 2018 intervened in the inter-bank Foreign Exchange Market to the tune of $210 million.
Meanwhile, $1 exchanged for N361 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY 1 exchanged for N53.
Source News Express