Banking
Nigerian Banks’ Earnings, NPL Risk Still Under Pressure—Moody’s
By Modupe Gbadeyanka
Renowned global credit rating company, Moody’s, has warned that the earnings and Non-Performing Loans (NPLs) of banks operating in Nigeria are still under pressure despite having outlook as an improving operating environment.
In its latest outlook for the nation’s banking sector, Moody’s said, “Nigerian banks’ profitability will nevertheless decline on account of lower yields on government securities, as well as a likely reduction in income from derivatives.”
In the report released yesterday, the rating agency said explained that outlook for the Nigerian banking system remains stable as their foreign currency liquidity risks moderate due to rising oil prices and a more liberal foreign exchange policy.
Business Post reports that the yields on Treasury bills (T-bills) have been declining in recent months as major economic indicators turn positive. The yields have dropped from over 18 percent in the last one year to 10.60 percent as at Wednesday.
Likewise, returns on Federal Government of Nigeria (FGN) Bonds have also nosedived to around 13 percent from over 14 percent previously.
Analysts explained that as the economy recovers and attracts more confidence of foreign investors, earnings on government securities drop.
This is supported by recovering global oil prices and a more liberal foreign exchange market.
However, Moody’s expects banks’ earnings to come under pressure, capital metrics to decline marginally, and asset quality to remain weak between the next 12-18 months, resulting from declining yields on government securities, the introduction of new IFRS 9 accounting standards, and increase in NPLs of the banks.
“Operating conditions for the Nigeria’s banks will continue to gradually improve over the next 12 to 18 months, but remain challenging,” the Vice President and Senior Credit Officer at Moody’s, Mr Akin Majekodunmi, disclosed at a conference in Lagos.
“Nigeria’s growth prospects remain vulnerable to global oil prices, as crude oil will remain the nation’s largest export commodity and its main generator of foreign currency for the foreseeable future,” he added.
However, Moody’s expects the pressure on the Nigerian banks’ profitability to be offset partially by a recovery in loan growth and transaction income from the expansion of digital platforms, and the ease of foreign currency shortages.
Foreign currency loans accounted for 40.7 percent of the system wide loan book at the end of the third quarter of 2017, down from 50 percent at year-end 2016.
A significant proportion, some 10 percent to 20 percent, has been dispersed to borrowers with little or no foreign currency income.
These borrowers are vulnerable to fluctuations in the naira/dollar exchange rate as a depreciation of the naira reduces their repayment capacity, Moody’s said.
Moody’s conducted a scenario analysis to gauge the solvency of banks under both a base-case and a low-probability highly stressed scenario that is roughly equivalent to a 1-in-25 year event.
“Under our base-case (or most likely) scenario, we expect the system-wide capital ratio to remain roughly stable over a two-year horizon. This is driven by an increase in loan losses, due to an increase in system-wide non-performing loans and in risk-weighted assets, driven by loan growth.
“This impact would be offset by pre-provision income leaving the capital ratio virtually unchanged at 17.0%,” Moody’s said.
In the report titled ‘Banking System Outlook: Nigeria,’ Moody’s forecasts a recovery in real Gross Domestic Product (GDP) growth over the next two years, up from 0.8 percent last year, helping lending growth rise to around 10 percent after a 15.4 percent contraction in 2017.
On the weakening of asset risk, Moody’s expects only a moderate deterioration in loan performance given the lagging effect of subdued economic growth – continued asset risk vulnerability from banks’ large exposures to the oil and gas sector and foreign currency borrowers in general capital weakening .
The banks’ capital levels are projected by the rating body to decline moderately on account of the introduction of IFRS 9. While it expects provisioning costs to be absorbed by pre-provision income.
On the stability of funding and liquidity, the Banks are projected to continue to benefit from stable deposit funding and solid liquidity buffers in local currency.
The agency also expects banking system income to be supported by both a recovery in loan growth to 10 percent over 2018 and an increase in noninterest income/transactional income through the promotion of e-banking platforms.
By Modupe Gbadeyanka
A bank account targeted at Nigerians who are 50 years and above known as Senior Citizens Account has been introduced by Stanbic IBTC Bank.
Senior Citizens Account is an all-encompassing banking solution designed to meet the immediate and long-term financial needs of individuals approaching retirement or those already in their retirement phase.
The package comprises comprehensive features such as zero account opening balance, zero account maintenance fee, free debit card and chequebook, health insurance and telemedicine, wills service and funds management.
Stanbic IBTC Bank described it as an innovative solution exclusively designed for customers in the age category and is expected to serve over 15 million Nigerians estimated to be within this age range, according to Index Mundi.
Through this very thoughtful banking service for the elderly, the financial institution can provide tailored financial services solutions that meet the special needs of this unique clientele.
According to the chief executive of the lender, Mr Wole Adeniyi, it is an excellent opportunity for people who are nearing retirement to consolidate their banking needs, investment management, and wealth transfer across generations and for retirees who rely on Stanbic IBTC Pension Managers to manage their pension funds, to also use Stanbic IBTC Bank to receive their gratuity payments while enjoying excellent benefits.
He said the Senior Citizens Account aims to provide people in their 50s and older with essential support and services, ensuring their financial well-being and stability.
Senior Citizens Account is not just another banking product; it represents a paradigm shift towards creating a banking experience that significantly enhances its users’ lifestyles.
It is crafted to offer senior citizens a sense of financial security, unparalleled convenience, and an improved sense of well-being.
This commitment to exceeding customers’ expectations is further demonstrated by the bank’s initiative to introduce cutting-edge features aimed at making banking services more accessible and convenient.
The financial institution has substantially improved its technical infrastructure, reducing system downtime from 3 per cent to a mere 0.5 per cent.
This reduction in downtime confirms its dedication to providing reliable and uninterrupted service, ensuring that customers’ banking experiences are smooth and hassle-free.
Through these initiatives, Stanbic IBTC Bank reaffirms its commitment to innovation and customer satisfaction, aiming to bridge the gap between modern banking and the evolving needs of the ageing population.
By developing products like the Senior Citizens Account, the Bank addresses a previously overlooked market segment and sets new standards in offering tailored financial solutions that contribute to their overall quality of life.
For individuals interested in discovering more about Vitality Plus and the enrollment process, information is readily available at www.stanbicibtcbank.com or at any Stanbic IBTC Bank branch nationwide. This initiative is part of Stanbic IBTC Bank’s ongoing efforts to refine and adapt its services to meet the evolving needs of its customers better, ensuring that every client, regardless of age, has access to top-tier banking solutions that reflect their lifestyle and aspirations.
By Modupe Gbadeyanka
Nigeria’s Vice President, Mr Kashim Shettima, has expressed his delight over the unicorn status attained by Moniepoint Incorporated in October 2024 after it secured a $110 million funding package from Google.
Speaking when the company paid a courtesy visit to him at the Presidential Villa recently, the VP said he was happy with the growth trajectory of the financial technology (fintech) company, charging the team not to rest on its oars.
He promised to be the “chief promoter” of Moniepoint because the firm has become the pride of the country and must be supported by all.
Mr Shettima urged the company to continue expanding its global footprint, referencing his ongoing support for similar initiatives such as Amal Hassan’s Outsource to Nigeria project.
The Vice President described Moniepoint as a “kaleidoscope of colours” because of the diversity of its team, saying it reflects the beauty of Nigeria’s multicultural and multi-regional identity.
He was particularly pleased with the inclusion of individuals from various regions and backgrounds, including a notable representation of women in leadership and operational roles.
However, he charged the organisation and others to ensure stronger auditing measures to prevent misuse of the platform, especially by fraudsters and criminal elements, tasking them to remain vigilant and proactive in addressing these challenges.
Earlier, the chief executive of Moniepoint, Mr Tosin Eniolorunda, thanked the federal government for its dedication to digital innovation and financial inclusion.
He emphasized Moniepoint’s commitment to Nigeria’s financial ecosystem, stating that the fintech giant has grown into Africa’s latest unicorn this year, a testament to its resilience and innovation.
“At Moniepoint, we are big believers in driving collaborations across the entire eco-system and this is premised on collaboration being the cornerstone of progress.
“Our engagement here underscores our intentionality to enhance government business relationships in a way that powers the dreams of millions of many more Nigerians.
“Together, we can unlock opportunities, transform lives, and build a more inclusive economy for all,” Mr Eniolorunda, who led the team comprising the Managing Director of Moniepoint Microfinance Bank, Mr Babatunde Olofin; the Vice President for Corporate Affairs at Moniepoint, Didi Uwemakpan; the SVP for Investor Relations and M&A, Ross Strike; the Head of Partnerships, Efemena Ogie; the Regional Manager for North West, Abdulmumin Tijjani; and the Partner at Lightrock Global, Ravi Sharma, said.
By Adedapo Adesanya
The Central Bank of Nigeria has set a minimum trade value of $100,000 for interbank foreign exchange trading via the Electronic Foreign Exchange Matching System (EFEMS), which is set to go live on December 2.
This was contained in a new directive dated November 25, 2024, and signed by CBN’s Director of the Financial Markets Department, Mrs Omolara Duke.
The circular also noted that the development is part of efforts to ensure transparency, efficiency, and compliance within Nigeria’s FX market.
The EFEMS is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations.
The statement also said CBN has designated Bloomberg’s BMatch as the official order-matching platform for interbank transactions, with trading hours set between 9:00 am and 4:00 pm West Africa Time on business days.
The apex bank also said the $100,000 minimum tradable amount comes with incremental clip sizes of $50,000.
The EFEMS is also limited to spot FX transactions involving the Nigerian Naira and the United States Dollar. This means transactions occur “on the spot” or close to the trade date.
The CBN, however, retained the discretion to introduce other currency pairs when deemed necessary.
The guidelines document read, “All trades consummated on EFEMS are binding unless cancelled by mutual agreement of both parties with written approval from the CBN.
“The minimum tradable amount is US$100,000.00, with incremental clip sizes of US$50,000.00.
“Participants must set credit and settlement limits for other counterparties in the system. Transactions exceeding these limits will not be executed.
“Participants must have adequate credit and settlement limits set for the CBN as its counterparty bank.
“Participants are required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.”
The apex bank noted that participation in the EFEMS is limited to authorised dealer banks while other institutions wishing to join the platform must first obtain prior approval.
These entities are also required to execute agreements with the CBN-approved platform provider, maintain accurate profiles, and operate within prescribed credit and settlement limits.
Withdrawal from the platform must be preceded by a 30-day notice, along with the resolution of any outstanding obligations.
Also, trades conducted via the platform will remain anonymous until matched. Counterparty details will only be revealed once transactions are concluded and are in line with settlement protocols.
Transactions exceeding set limits or conducted outside EFEMS parameters must be reported promptly and logged onto the FX blotter within 10 minutes.
The CBN emphasised that it will closely monitor all transactions on EFEMS to ensure market integrity and transparency.
Participants are also required to submit daily reports detailing trade volumes, settlement statuses, and counterparties.
The CBN discloses that it also reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.
Any violations of the EFEMS guidelines or related regulations will attract strict penalties, including the suspension or revocation of access rights.
The CBN further stated that it will periodically review the platform’s operations to ensure efficiency and compliance with its directives.
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