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The Asset Management Corporation (AMCON) Bill was <a href=”http://www.bloomberg.com/news/2010-07-19/nigeria-president-goodluck-jonathan-signs-asset-management-corporation-law.html”>signed into law on July 19th</a>. You can call it the “Bad Bank Bill”. It will create the company (AMCON) that will buy the bad debt from the banks. The hope is that it will stimulate bank lending and ensure the health of the banks.
Here is <a href=”http://www.cenbank.org/”>CBN</a>’s press release after the bill was signed:
<a href=”http://www.cenbank.org/Out/2010/pressrelease/gov/PRESIDENT%20GOODLUCK%20JONATHAN%20SIGNS%20AMCON%20BILL.pdf”>CBN Press Release On The Signing Of The AMCON Bill</a>
<a href=”http://drop.io/hidden/ahltwvu68gm7ccy/asset/dmV0aXZhYmFua2luZ3VwZGF0ZWFtY29ubmlnZXJpYXMtYmFkYmFuay1wZGY%253D”>Vetiva Banking Update – July 2010 – Analysis Of Bad Bank Bill</a>
In: CBN|News|special reports
23 Apr 2010The Monetary Policy Committee of the CBN held their monthly meeting on April 15th. Afrinvest prepared an analysis of this communique. Read below and you can also download the report below too.
1. MPR is still retained at 6.0%, with an asymmetric corridor of +2.0% and -5.0%;
2. Technical Committee’s recommendations on the injection of the N500.0bn financing facility for the emergency power projects for industrial clusters, as well as modalities regarding the refinancing/ restructuring of banks’ exposures to the manufacturing sector and SMEs approved;
3. Banks required to submit their risk-based interest rate pricing models on a monthly basis. Loan pricing should henceforth be stated at a fixed spread above MPR and adjusted along with MPR movements;
4. Complementary policies being put in place by the CBN Board endorsed, including the revised guidelines for loan loss provisioning, the N200.0bn guarantee for real sector lending and regulations governing margin lending;
5. CBN to continue its efforts towards the expedited passage of the AMCON Bill and its speedy implementation.
Key Domestic Macroeconomic Statistics
Provisional data from the National Bureau of Statistics (NBS) show that in Q1 2010, real Gross Domestic Product (GDP) grew by 6.68%, largely driven by the non-oil sector. Overall GDP for 2010 is however projected at 7.53%, with the non-oil sector still expected to be the main driver.
The year-on-year inflation fell to 11.8% in March 2010, from 12.3% in February 2010. This could be attributed to numerous factors, including the on-going money contraction, delays in the passage of the 2010 federal budget and the improvement in the supply of petroleum products.
The MPC re-stated its position that the risk of inflationary pressure in the near-to-medium term remains real; it however asserted that it will continue to monitor price developments to facilitate an enabling environment for sustainable growth and employment.
Implications
Afrinvest Research re-iterates its position that the N500.0bn facility for emergency power projects is a step in the right direction. We also believe that the ongoing review of regulations governing margin lending as well as prudential guidelines on loan loss provisioning will improve transparency and corporate governance in the banking sector. It will also help the banks to more efficiently hedge against risks.
Retail lending rates have remained stubbornly high despite the significant fall in interbank rates, deposit rates and the Standard Deposit Facility rate. This has therefore resulted in a wide spread between lending and deposit rates. Banks are still unwilling to lend to the real sector, given their rather reticent approach to the creation of new risk assets. The MPC is therefore trying to establish a proper transmission mechanism from policy rate adjustments to market (interest) rates and, hopefully, channel funds from the banks to the real sector.
Afrinvest Research is of the opinion that though banks may still be unwilling to resume lending, they will however be forced to do so over time as they come under increasing pressure from a number of angles; coupled with recent CBN measures taken to encourage lending, shareholders would also begin to press for better returns than what currently obtains (deposits with the CBN at a low rate and money market securities with low yields), thus mounting pressure on the banks to resume lending. We also believe that the sector will witness even more intense competition amongst operators, which would naturally force them to resume lending as they fight for turf.
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The last meeting of the Monetary Policy Committee of the CBN was held on March 1st – 2nd. Here is the excerpt from the communique on the key decisions made:
In: CBN
2 Mar 2010Over the weekend, the CBN Governor gave a speech on what went wrong with the banking system in Nigeria. You can download the paper below. He listed 8 main factors namely, macro economic instability caused by large and sudden capital inflows; major failures in corporate governance at banks; lack of investor and consumer protection; inadequate disclosure and transparency about the financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management process at the CBN and weaknesses in the business environment in the country.
<a href=”http://www.vanguardngr.com/2010/03/01/banking-reform-what-went-wrong-%E2%80%94-sanusi/”>Vanguard Newspapers</a> has a brief account of the speech:
CBN Reelases Template/Guidelines For Minimum Information To Be Disclosed In Financial Statements
The <a href=”http://www.cenbank.org/”>Central Bank of Nigeria</a> last week announced the names of 5 new members of the Monetary Policy Committee. They are listed below with their areas of specialization:
1. Dr. Adedovin Salami – Macroeconomic Policy
2. John Oshilaia – Financial Markets
3. Prof. Chibuike Uaochukwu Uche – Banking and Finance
4. Dr. Shehu Yahaya Development Economics
5. Abdul-Ganiyu Garba Monetarv & Fiscal Policies
<strong>Dr. Adedoyin Salami</strong> is a Senior Lecturer and full time member of the Faculty of the Lagos Business School, Pan African University. He is the Head of Research at the Lagos Business School. His academic interest includes Macroeconomic policy and risk management and is a consultant to DFID, World Bank, UNIDO, etc. He is also a member of the National Economic Management Team. John Oshilaja is an expert in Public Finance and Financial Markets Developments in Emerging markets. His working experience spans over 25 years and include Latin America, Eastern Europe, Middle East and Africa. He also possesses significant experience in Public Sector debt restructuring in Brazil. Mexico, Kenya and Nigeria.
<strong>John Oshilaja</strong> is an expert in Public Finance and Financial Markets Developments in Emerging markets. His working experience spans over 25 years and include Latin America, Eastern Europe, Middle East and Africa. He also possesses significant experience in Public Sector debt restructuring in Brazil. Mexico, Kenya and Nigeria.
<strong>Prof. Chibuike Uche</strong> is a Professor of Banking and Financial Institutions and full time lecturer in the Department of Banking and Finance, University of Nigeria, Enugu Campus. He is a fellow of the Institute of Chartered Accountants of Nigeria (FCA). His research interest includes Bank Management, Financial Institutions and Markets.
<strong>Dr. Shehu Yahaya</strong> is currently an Executive Director in African Development Bank and possesses rich and varied experience in development economics, macroeconomics and international economics. He was previously Head of Research Department and Head Projects and Corporate Finance at ADB. He also has valuable experience in banking policies as well as project and program implementation, and previously served as an Executive Director in NEXIM. He brings to the Committee important policy contribution from ADB.
<strong>Prof. Abdul-Ganiyu Garbo</strong> is a Lecturer in the Department of Economics in Ahmadu Bello University, Zaria and has taught economic theory and econometrics. He has also conducted research in several aspects of monetary & fiscal policies and trade and exchange rates. Prof. Garba is a member of African Economic Research Consortium (AERC), Nairobi-Kenya, Nigeria Economic Society and has over 60 publications, locally and internationally. He has participated actively in several conferences and seminars organized by the Central Bank.
The Central Bank of Nigeria released new guidelines for the tenures of bank CEOs. Here are the new guidelines:
1. Chief Executive Officers, CEO of banks shall serve a maximum tenure of ten years.
2. All CEOs who would have served for ten years by July 31, 2010 shall cease to function in that capacity and shall hand over to their successors.
3. Where a bank is a product of merger, acquisition, take-over or any other form of combination, the ten–year period shall include the pre and post combination service years of a CEO provided that the bank in which he previously served as CEO was part of the new bank that emerged after the combination.
4. Any person who has served as CEO for the maximum tenure in a bank shall not qualify for appointment in his former bank or subsidiaries in any capacity until after a period of three years after the expiration of his tenure as CEO.
5. The Governor/Deputy Governors of the CBN and the Managing Director/CEO and Executive Directors of the Nigeria Deposit Insurance Corporation, NDIC shall not be eligible for appointment in any capacity in banks until after the expiration of five years from the date of their exit from the CBN or NDIC as the case may be.
6. The Departmental Directors of the CBN and the NDIC shall not be eligible for appointment in any capacity in banks and their subsidiaries under the supervision of the CBN and NDIC until after the expiration of three years from the date of their exit from the CBN or NDIC as the case may be.
7. Henceforth, all banks shall reflect the provisions of these guidelines in the terms of engagement of their CEOs.
You can download the CBN release <a href=”http://www.cenbank.org/Out/2010/publications/pressRelease/GOV/Tenure_Guideline19012010.pdf”>here</a>.
In: CBN
12 Jan 2010Early last week, CBN released statements on the Disengagement of workers from banks and CBN’s stand, Appointment of directors to 3 of the banks, Guarantee of interbank lending and foreign credits, and Rules for banks on disclosing bank rates.
Here are the main points from the different releases:
1. Banks are henceforth required to submit on weekly basis to the CBN their average deposit and lending rates in line.
2. The Central Bank of Nigeria has never directed commercial banks to sack staff or rationalize branches as reported. Banks are private enterprises and the decision to engage or disengage staff is best left to the management and boards of the institution. These decisions are taken on the basis of business imperatives.
3. The Central Bank remains committed to
guaranteeing all foreign credit lines and interbank exposures up to
December 31, 2010.
You can download them below.
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Here is the CBN statement on the stunning CBN losses released last Friday: PRESS RELEASE ON THIRD QUARTER (Q3) RESULTS RELEASED BY DEPOSIT MONEY BANKS In line with the Central Bank of Nigeria’s new disclosure standards which are central to the Bank’s ongoing banking sector reforms, all deposit money banks (DMBs) in Nigeria have announced [...]
Here is the communique from the MPC meeting held on Nov 4th 2009:
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From the CBN regarding Equitorial Trust Bank:
Following the Special Examination of all banks operating in the country, and the subsequent actions by the CBN, the shareholders of Equitorial Trust Bank Limited requested the permission of the Central Bank of Nigeria to be allowed to rectify lapses identified in the bank. In pursuance to that, the shareholders executed a Deed of Covenant, the specific terms and conditions of which included the following:
i. The willingness of the shareholders to recapitalize the bank by way of injection of additional capital latest by June 30, 2010;
ii. Restructuring, diversification and enlargement of the capital base of the bank either by way of a public offering of shares, securing a core investor or merger with a local bank within one (1) year period;
iii. Addressing the corporate governance issues in the bank which were mainly ascribed to the previous Executive Management team in the bank;
iv. Reconstitution of the Board of Directors of the bank through the retirement of two non-executive directors and the appointment of four new non-executive directors, including Dr. Mike Adenuga Jnr. (CON), an erstwhile member of the board, subject to the approval of the Central Bank of Nigeria; and
v. Convening a general meeting of the bank’s shareholders to ratify, through a resolution all the nominated appointments to the bank’s board.
Download the full statement here.
The <a href=”http://www.cenbank.org”>Central Bank of Nigeria</a> on Wednesday, released the list of debtors with non-performing loans to the banks that were recently taken over (Bank PHB, Equitorial Trust Bank, and Spring Bank). Here is an excerpt of <a href=”http://www.tribune.com.ng/15102009/news/news10.html”>Tribune Newspaper’s</a> report:
<blockquote>IN its ongoing sanitisation of the nation’s banking sector, the Central Bank of Nigeria (CBN), on Wednesday, released another list of individuals, corporate organisations, parastatal agencies and state governments owing five banks whose audit reports were released recently.
The total amount owed the five banks, according to the release, is N346,408,028,581.04, excluding the sum total of non performing loan of Wema Bank, which could not be ascertained at press time.
The non performing loans of the banks as at June 30, 2009 and October 5, 2009 respectively revealed Bank PHB topping the list with N170,073,403,358.39, followed by Spring Banks (N95,594,989,430.06), Equitorial Trust Bank’s (N46,154,945,774.44) and Unity Bank (N36,585,690,018.15).
As usual, names of politicians, businessmen and contractors topped the list. These include the former Managing Director of Wema Bank Plc, Mr. Adebisi Omoyeni whose Independent Securities Ltd owes N5 billion and Barrister Jimoh Ibrahim whose total loan is put at N5 billion also.
Others include Femi Otedola of Zenon Petroleum Gas Limited (N5,154,041,716.86), Peter Ololo of Petosan Oil & Gas Company Limited (N4,548,125,091.02), Chief Oyewole Fasawe (N7,874,801,592.84) and Kola Daisi of National Sports Lottery Ltd (N4,821,060,327.76).</blockquote>
You can download the report below.
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