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State Governments Own Most Bad Roads – Finance Minister says

Minister of Finance, Budget and National Planning, Zainab Ahmed has disclosed that most of the bad roads in Nigeria belong to the states.

The Details: According to the Nation, Ahmed argued that most bad roads in the country were within the jurisdiction of states. She made this statement after the Federal Executive Council (FEC) meeting that held yesterday in Abuja.

She went further to state that the Federal Ministry of Works was the biggest beneficiaries of funding in the 2019 budget as it was adequately reimbursed for the purpose of roads rehabilitation in the country.

So far, the sum of N650 billion had been released to fund capital projects,” she said. This figure, according to her is higher than the sum the President ordered to be released last month. She also promised that an extra N250 billion would be released for capital projects to bring the total sum to N900 billion by the end of the year.

Refuting the claim of the Minister of Works and Housing, Babatunde Fashola over the lack of finance to fund road repairs, Ahmed responded that the government had gone as far as issuing several Sukuk Bonds to cope with financial responsibilities associated with road construction.

The Minister said, “Works is always on the priority list; housing is always funded. Same is transportation and power, though we have revenue challenges.

 “It allows me to state that the Minister of Works and Housing has a proposed budget of N247 billion for the year 2020 and the greatest component of this budget is the fixing of Nigerian roads.

“Indeed, we are not able to fund the budget 100 per cent, but whenever we release funds for capital projects, the Ministry of Power, the Ministry of Works and Housing is always the priority and also the Ministry of Transport.

“Our fiscal space is tight, resources are limited because revenues are on the performing but at the time we have resources, funds to release, the highest proportion goes to Power, Transport, World and Housing. Also, we have introduced some measures that have seen private sector participants getting involved in road construction.”

Ahmed acknowledged that the government had not done enough to rehabilitate roads all over the country but still attributed most of the bad roads in the country to the states.

We have a lot of roads in the country but not every road you see is the responsibility of the Federal government. The major arterial roads are the ones that are the responsibility of the federal government.

“Majority of the roads in the country are within the purview and responsibility of States as well as local governments.

“Have we done enough? No, not yet, that is why we are trying to do more including raising special funds to make sure that roads and such other infrastructure are being addressed,” she said.

Source: NairaMetrics

95pc of Kenya’s Financial Analysts Fail CFA Examination

Only 5 percent of Kenyan financial analysts seeking accreditation from the global body were awarded charters after most who took its gruelling examinations, considered one of the sector’s hardest, failed.

This is according to the Institute of Chartered Financial Analysts (CFA) Society of East Africa that last week awarded 38 Kenyans charters for 2019 out of more than 700 analysts who had enrolled in the programme.

The performance is an improvement from 2016 when only 20 Kenyans received charters out of more than 500 individuals who sat the multi-level exams. That same year, only six analysts in Uganda, Tanzania and Rwanda got the charters out of 160 who were in the programme.

A chartered financial analyst is a globally-recognised professional designation given by the CFA Institute. It certifies the competence and integrity of financial analysts.

The dismal performance, however, comes as demand for CFA charters in Kenya has grown over the years. This is because the charter is considered an asset for anyone seeking a career and senior roles in investment management.

“Of late, we have seen a rise in demand for the programme by investment managers and financial analysts from investment companies, mutual funds, brokers’ investment banks, research analysts, financial advisers and risk managers,” said Patricia Kiwanuka, CFA East Africa president.

East African’s pass rate is currently at 30 percent, up from 10 percent in 2016. This is slightly lower than the worldwide pass rate of about 40 percent.

Ms Kiwanuka attributes the high failure rate to the programme’s high cost and rigour.

“For one to receive a charter, one needs to commit a minimum investment of about 1,000 hours and more than Sh300,000,” she said.

The CFA exam has three levels. The tough exam asks questions from an array of topics including ethics, financial reporting, portfolio management and economics.

Source: businessdailyafrica

Jaiz Bank: How Islamic banking differs from the conventional type

Hassan Usman, the chief executive officer of Jaiz Bank, says the basis of the services offered by the bank is based on moral principles derived from all the religions.

Explaining the bank’s services to journalists at a media parley, Usman said the emphasis of their services is the avoidance of interest.

“When you come to the Islamic bank, we take current account just like any conventional bank would take, we also take deposits that are for tenures which do not just demand deposit. To that extent we are similar,” he said.

“We take these deposits, we don’t just keep them, we take these deposits to finance. We try to avoid the word loan, instead, we say we finance business. We use loans technically; it’s not supposed to be a business in Islamic finance. So, we avoid the word loan and rather use the word finance.

 

 

“We don’t give loans in the traditional sense, but we finance projects, we finance needs and services of our customers based on either a sales contract with a customer with a deferred payment, or a lease contract with a customer to be paid or we sometimes do sharing contract which means we give capital to the customer and then we share his profit.

“When you look at the conventional bank, all of the money they generate, they don’t sit on it. The central bank will take the reserve ratio, they’ll keep a little, but most of it will be spent on treasury bills.

“An Islamic bank cannot do this; it has to generate different types of debt instruments, which the central bank ought to have provided through the Debt Management Office when we were starting. We had to keep enough money with us to ensure that we had smooth operations.

“The conventional banks, they are about 20+ so they have counterparts, so you don’t have to always see that you are self-sufficient in liquidity; you can take money from your counterparts, you’ll buy money from them and you pay.

“So that’s what your treasury department would be doing on a daily basis, looking at your needs and making sure that you’re square (foreign exchange needs, withdrawal needs). Imagine that within that period, JAIZ had to be self-sufficient in all of this, that means it is always liquid and always ready to meet it’s customer requirements.”

Speaking further, Usman said Jaiz Bank is now a national bank and has its sights set on deepening its activities in other regions of the country.

He also said that the bank has a charity arm through which N2.3 billion has been spent on various activities.

Investment to Make Africa a World Leader in Renewables

Johannesburg, South Africa — Africa, where close to half of its 1.2 billion people have access to electricity, is set to become a world leader in renewable energy. As global business and development leaders met in Johannesburg, South Africa, to attend the Africa Investment Forum (AIF), held Nov. 11 to 13, one of the key focuses of the deals being discussed was around sustainable, renewable energy.

Organised by the African Development Bank (AfDB) and its various partners, the forum is expected to see $67 billion in deals closed over the next few days.

Leaders are doing all they can to encourage investment

In attendance where heads of state from South Africa, Ghana, Rwanda and Mozambique. At an invitation-only discussion among the leaders, Rwanda’s President Paul Kagame said there was a lot of progress in Africa as a whole.

“I have always thought it was Africa’s time. We African’s have let ourselves down, we are now realising it has always been our time. And we are now seize every opportunity and be where we should be by now,” Kagame said.

Kagame was the driver of the African Continental Free Trade Agreement (AfCFTA) during his time as chair of the African Union in 2018. The agreement had not been in existence during the first AIF last year.

Established in March 2019, the AfCFTA has now been signed by 54 of the 55 African member states.

Alain Ebobisse, CEO of Africa 50, the Pan-African infrastructure investment platform capitalised by the AfDB, said that there was a consensus from African leaders that they needed to do whatever they could to attract more private investment. He said that the AIF attendance showed that there was a changing narrative for investment on the continent.

Earlier figures had been revealed by the South African premier of Gauteng Province, David Makhura, that over 2,000 delegates were in attendance from 109 countries. Of this, only 40 percent where from Africa with the majority of investors attending from Asia, Europe and the Americas.

Gauteng is South Africa’s wealthiest province and includes the financial centres of Johannesburg and Sandton, as well as the seat of government in Pretoria.

Renewable energy on a positive trajectory

Ebobisse said that a lot was already happening on the continent and while the media focused on the challenges there were huge success stories too — like the 1.5 GW Benban Solar Park in Egypt, which is the world’s largest solar photovoltaic plant.

“I’m sure that people are not talking enough about this major achievement which is the Benban Solar Programmer, 1.5 GW of solar that was invested mostly by the private sector in a record time,” he said.

Africa 50 invested in 400 MW in that project and completed it from design to commercial operations in two and a half years.

Ebobisse went on to highlight Kenya’s opening this July of the Lake Turkana Wind Power project, which at a generation capacity of 300 MW makes it the largest wind power project on the continent.

“It was funded by the private sector,” Ebobisse told the media. He also looked towards Senegal which was implementing many independent power producers or IPPs in the solar sector.

“So there is a lot that is happening. We need to also widely understand the challenges and understand what is happening on the ground. And people are actually making good money in this investment. And there is nothing wrong about that. Let’s celebrate those successes,” he said.

Making Africa a world leader in renewables

A few weeks ago, the Governors of the AfDB met in Cote d’Ivoire’s capital Abidjan, approving a historic $115 billion increase to the bank’s authorised capital base to $208 billion. “This is the highest capital increase in the history of the bank since its establishment in 1964,” AfDB president Akinwumi Adesina said today.

During the October announcement Adesina had said that a significant portion of funding would be invested in climate change.

Today, in response to a question from IPS, Adesina further explained that the bank had doubled its investment in climate finance from $12 billion to $25 billion by 2020.

“Almost 50 percent of our finance will be going to climate adaptation as opposed to climate mitigation. So we are the first multilateral development bank to actually reach that balance in terms of adaptation and mitigation,” he said.

Climate mitigation is the actions taken to reduce or curb greenhouse gases, thereby addressing the causes of climate change to prevent future warming. However, climate adaptation addresses how to live with the impacts of climate change.

“I believe that coal is the past. I believe that renewable energy is the future and we as a bank are investing in not in the past, but in the future in making sure that we are investing in solar energy, in hydro energy, in wind, all types of renewable energy that Africa needs,” Adesina said.

“We want Africa to lead in renewable energy.”

He said one of the projects was the AfDB’s Green Baseload Facility, which according to the bank, aims “to accelerate the transition towards more sustainable baseload power generation options and prevent countries from locking themselves into environmentally damaging and potentially economically costly technologies”.

“It’s a $500-million facility that we have set up to support countries that want to shift out of fuel-based energy into renewable energy and providing access to finance at a cheaper rate to be able to make that transition,” Adesina said.

The bank’s biggest investment is the Desert to Power project, which was announced in December at the United Nations’ Climate Conference in Katowice, Poland.

The initiative plans to supply 10 GW of solar energy by 2025 to 250 million people across 11 Sahelian countries.

“That would make it the largest solar zone in the world,” Adesina stated. The bank will work in partnership with various investors to also establish plants on the continent that will manufacture the solar panels for the project.

The AfDB has always stated “a lack of energy remains a significant impediment to Africa’s economic and social development”.

According to AfDB, energy poverty in Africa is estimated to cost the continent 2 to 4 percent GDP annually.

Africa’s climate crisis

The continent is facing climate change impact with rising temperatures and reduced rainfall.

The Sahel, which lies between The Sahara and the Sudanian Savanna, offers a blaze of sunlight with little rain as it is the region where temperatures are rising faster than anywhere else on Earth, according to the Great Green Wall initiative, a project that aims to reverse desertification and land degradation in the area.

Last month, IPS reported that as The Sahara desert continues to expand, it tears apart families, forces migration from rural areas to cities and has contributed to conflict for precious resources of water, land and food.

In July, IPS reported that the parts of Kenya had already warmed to above 1.5˚C — a figure deemed acceptable by global leaders during the 2015 Paris Agreement. But at such high temperatures a study found that over the last four decades livestock some Kenyan counties had decline by almost a quarter because of the temperature increase over time.

During the U.N. Framework Convention on Climate Change in Paris in 2015, all countries committed under the Paris Agreement to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C”.

But last year the U.N.’s Intergovernmental Panel on Climate Change released a special report warning that the world would face the risk of extreme heat, drought, floods and poverty at a temperature rise of 1.5°C.

However, the forum showed that there remain a number of investors looking to provide funding for renewables and other development project on the continent.

Siby Diabira, regional head for Southern Africa and the Indian Ocean for PROPARCO, a subsidiary of Agence Française de Développement (AFD) focused on private sector development, told IPS that last year the group did $1.76 billion in investment deals, half of which was in Africa. The AIF was still in its early stages to make a pronouncement on the success of the deals, Diabira said, but “so far so good”.

Diabira said the French development agencies aimed to be 100 percent compliant with the Paris Agreement and hence were investing heavily in renewable energy.

She explained that PROPARCO was involved in “all types of renewable energy from hydro to solar to wind”, adding that there was a need for a mix of both traditional and renewable energy generation.

“I have been attending some of the boardroom [discussions]. It is a quite interesting gathering to have for the second year and to have so many different types of investors and projects that are raising funds for these types of events,” she said.

“We have been present in financing the first few rounds of renewable energy projects in South Africa and our idea is also as a [Development Financial Institution] DFI to be able to contribute to create this market for the commercial banks to come with us on those types of projects,” Diabira said.

Admassu Tadesse, President of the Trade and Development Bank, also pointed out that partnership agreements among the various banks and partners had strengthen their position in deals.

“If you have smart partnerships you can scale up collectively. With the African Development Bank we have signed a risk participation agreement to the tune of $300 million, which will allow us to move speedily into fields and have partners coming into deals alongside us.”

He said they expected to soon sign a deal with the European Investment Bank (EIB) that will again strengthen their position.

EIB vice president Ambroise Fayolle said they were attending this year with great intentions to develop transactions. He said it came on the back of their 2018 record year of investments in the continent, which amounted to some $3.6 billion — more than 50 percent of which was in the private sector. The bank signed 3 partnerships already, he said, none of which would have been possible without the AIF.

And as Adesina stated in a video message at the start of the forum, “Let the deals begin”.

Source: allafrica

IMF Says Benin’s Economy is Stronger Despite Nigeria’s Border Closure

The Republic of Benin has continued to post a strong economic performance despite the closure of the border the country shares with Nigeria. This is according to the International Monetary Fund (IMF).

Luc Eyraud, who led the IMF team during their visit to Benin was quoted by the Fund in a press release saying, “Real GDP is expected to grow by 6.4% in 2019, mostly driven by the agriculture and transport sectors. Growth should accelerate in 2020 and remain sustained over the medium term, buttressed by vigorous cotton production, construction, and port activities.

“Consumer price inflation, affected by the high agriculture production, has been on a declining trend, falling by 1.4% in the first nine months of 2019, relative to the same period one year earlier.

“It is expected to remain well below the 3.0% regional ceiling in 2019 and 2020. The fiscal deficit for 2019 is estimated at 2.3% of the recently rebased GDP.

“Performance under the IMF-supported program has been very satisfactory so far this year. All end-June 2019 quantitative performance criteria and the end-September structural benchmark program were met.”

This is contrary to the words of the Director, African Department of IMF, Abebe Selassie, who said that the continuous closure of the Nigerian borders was hurting economies of Benin and Niger Republics.

Selassie spoke about the adverse effects the border closure had on the neighbouring countries like Benin republic but did not offer any solution. He urged the countries to come together and discuss in order to resolve the challenges caused by illegal trade and smuggling.

While Selassie understood the impact of the illegal trade, he hoped that there would be an amicable resolution in which both Benin republic and Nigeria (which he referred to as Benin’s big brother) would benefit from.

Source: nairametrics

Soludo Tasks Nigerians in Diaspora on Investment

A former Governor of the Central Bank of Nigeria (CBN) and member, of the National Economic Advisory Team (NEAT), Prof. Chukwuma Soludo, has told Nigerians in the Diaspora that it is in their interest to contribute to the prosperity of their country.

He argued that it is wrong to regard investment in the homeland by Nigerians abroad as an act of charity.

In his keynote address yesterday at the second Nigeria Diaspora Investment Summit at the Presidential Villa, Abuja, Soludo said racism and xenophobic attacks abroad had made it imperative for Nigerians in the Diaspora to have a prosperous country they could return to when the need arose.

He recalled that the Jews learnt their lesson in a hard way during their persecution which culminated in the Holocaust.

Soludo however urged the government to ensure the security of such investments, noting that the ease of doing business policy should be vigorously pursued.

“Diaspora synergy would be a decisive strategy for sustainable prosperity. In today’s world, a prosperous homeland is not just a choice, it is a duty.

“The diaspora is not just some group of people somewhere we are begging to come to Nigeria and do us a favour. My view is that the diaspora constitutes a strategic part of Nigeria and therefore, the development of Nigeria is not a choice, but a duty. But for this to happen, organisation is key.”

He disclosed that that the diaspora remittance estimated at over $2.6 billion would overtake crude oil earnings in the
future.

Soludo lauded the Chairman of the Nigerians in the Diaspora Commission, Abike Dabiri-Erewa, saying her efforts were worthy of commendation.

In his speech, the acting Chairman of the Economic and Financial Crimes Commission (EFCC), Ibrahim Magu, said the agency would mobilise Nigerians in the Diaspora to champion the recovery and repatriation of stolen assets back to the country.

He advised Nigerians abroad to invest in the country, noting that the anti-graft agency was working to rid the nation of corrupt elements.

Source: thisdaylive

Is Africa Ready for AfCFTA?

Fifty-four African countries recently ratified a continental trade treaty that will create an estimated $3.4 trillion market opportunity.

Popularly called the African Continental Free Trade Area (AfCFTA), the trade treaty promises to liberalise trade among African countries and create a single market for goods and services on the continent.

It is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063.

The treaty is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 and liberalise 90 percent of products manufactured in Africa. This means that a country can only protect 10 percent of its local industries.

Trade liberalists argue that it will favour small and medium-sized enterprises in Africa by enabling them to supply inputs  to  larger  regional  companies.

They cite the South African example. Due to free trade, large  carmakers  in  South Africa  source  leather  for  seats  from  Botswana  and  fabrics  from  Lesotho,  under  the preferential  Southern  African  Customs Union trading regime.

The AfCFTA officially came into force on 30th May 2019 when the required number of ratifications—22— were obtained, making the agreement a binding international legal instrument.  Negotiations are, however, ongoing.

After months of consultation and dilly-dallying, Nigeria’s President Muhammadu Buhari signed the AfCFTA  in July this year, seeking fair trade for Nigeria.

Speaking at an event in Niamey, Buhari noted that “Nigeria wishes to emphasise that free trade must also be fair trade.”

“As African leaders, our attention should now focus on implementing the AfCFTA in a way that develops our economies and creates jobs for our young, dynamic and hard-working population,” he added.

This made front pages of newspapers, but concealed a critical issue of trade readiness by Nigeria and the rest of Africa.

Today, many African countries, including Nigeria, are going against the spirit and letters of the AfCFTA.

In the first place, AfCFTA is targeted at open and free   trade, but Nigeria has been the biggest violator. The Central Bank of Nigeria is still increasing the list of items that are ineligible for foreign exchange access and is vehemently supporting closure of Benin borders.

These two actions are anti-trade, according to experts, and they fail to factor in issues like the supply-side constraints in the agriculture sector, inflation, pressure on manufacturers and exporters as well as possible impact on trade, analysts say.

Olu Fasan, member of the International Trade Policy Unit (ITPU) of the London School of Economics and Political Science, said the border closure will enrich local producers, without increasing their productivity and competitiveness, while also harming the interests of Nigerian exporters and consumers.

“Truth is, Nigeria’s deep-seated protectionism is not compatible with its international legal commitments. It would have to decide whether to comply with its international obligations, legally invoke the escape provisions in international trade agreements or withdraw from them altogether,” he said in a Monday column in BusinessDay.

In his article entitled, ‘Border closure: Nigeria is trampling upon the world legal order’, Fasan said the border closure is a blatant violation of Nigeria’s commitments under the World Trade Organisation (WTO) and Economic Community of West African States (ECOWAS) treaties.

“Surely, by closing its land borders to stop cross-border movement of goods, Nigeria is, firstly, prohibiting or restricting imports other than through duties, taxes or other charges, and, secondly, nullifying and impairing the benefits accruing to other WTO members, especially those in West Africa, whose legitimate exports to Nigeria are being restricted, in violation of WTO law,” he said.

“What’s more, Nigeria could justify the closure of its borders on the ground of curbing smuggling or customs enforcement under Article XX or on the ground of national security under Article XXI, provided the border closure does not constitute ‘a disguised restriction on international trade’. But everyone knows that the underlying reason for the border closure was not smuggling or national security concerns, but the protection of local industries, and, thus, it’s a disguised restriction on international trade,” he further said.

But Nigeria is not the only country in this party. Perhaps, much noise is made about Nigeria because of its strategic position as Africa’s most populous and biggest economy.

Sudan, in September, ordered closure of its borders with Libya and Central African Republic, citing security and economic dangers.

In June, Kenya shut its borders with Somalia for security reasons one week after outlawing along the coast near the Somalia border. Kenya authorities cited increased illegal trade, as well as human and drug trafficking in the area as major reasons for the latter action.

In April this year, Eritrea unilaterally closed all border crossings with neighbouring Ethiopia less than a year after the two countries made peace.

Before the outright closure in April this year, Ethiopia-licensed vehicles traveling to Eritrea from the Ethiopian town of Rama had been asked for permits in December 2018, according to a Reuters report.

“We did not receive any prior notice,” Reuters quoted  Liya Kassa, spokeswoman for the regional administration in the Tigray region which borders Eritrea, as saying in December 2018.

In March this year, Rwanda shut down borders against Uganda over diplomatic row that has seen the two countries suspecting each other.

In June this year, three civil society organisations sued  Rwandan and Ugandan governments on behalf of women traders suffering financial losses owing to the border closure.

The civil society groups said it contravened the 1999 Treaty for the Establishment of the East African Community  and violated the economic rights of women to engage in trade. Deaths were reported along the border, with security forces accused of perpetrating the acts.

In August, Equatorial Guinea said it was building a Trump-like border wall to stop Cameroonians and West Africans from illegally entering its territory.

Kenya, Rwanda, Equatorial Guinea, and Uganda, among others, are among countries that have signed onto the AfCFTA. Eritrea is not part of the AfCFTA.

Analysts believe the AfCFTA may fail unless African countries understand the impact of unilateral trade policies.

“Border closures are against the spirit and letters of the AfCFTA,” said an analyst.

“If we continue this way, there will be a lot of unilateral trade decisions that will be taken across the continent in AfCFTA era. This could defeat the AfCFTA objectives,” the analyst further said.

Though few of the reasons are understandable, given their connections with health, security and politics, decisions of border closure should not be taken without due consultations, say trade analysts.  This leads to the question: Is Africa really ready for the AfCFTA?

Housing Development

Helen Suzman Foundation, which promotes liberal constitutional democracy through broadening public debate and research,  said in a publication that South Africa’s past experience of free trade paints a bleak picture.

The Southern African Development Community (SADC) was founded in 1992. Despite agreement to reduce tariff, Malawi, Mozambique and Zimbabwe failed to cut tariffs on South African goods, arguing that the loss of potential tariff revenue was too great. This is despite that the SADC, unlike AfCFTA, excluded a number of important products such as vehicles, base metals, minerals and textiles.

“Trade in sugar – viewed as a ‘political good’ – was a source of major dispute and eventual impasse,” the report said.

Many experts are keeping mute over possible issues that could arise when the AfCFTA starts, but they are aware that it will test Africa’s readiness to trade. The continent’s intra-trade is estimated at 16 percent, which is relatively low when  compared to Europe’s 59 percent, Asia’s 51 percent and North America’s 37 percent.

There is a potential danger, but Africa is yet to discuss it.

Source: businessdayng

How Microfinance Banks Are Shoring Up Capital To Meet CBN’s Deadline

Efforts are on-going among Microfinance Banks (MFBs) in the country to shore up their capital following the directive from the Central Bank of Nigeria (CBN).

The CBN on March 18, 2018, reviewed the minimum capital requirements for microfinance banks, allowing for instalment payment and categorisation of Unit Microfinance into two of Tier 1 and Tier 2 capitals.

Consequently, tier 1 MFBs are to pay N200 million as minimum capital requirement, while tier 2 are expected to pay N50 million.

In compliance with the directive, some of the microfinance banks are partnering with foreign investors in this regard as seen with Lagos based Fina Trust Microfinance Bank Limited, a State licenced MFB, which last week announced completion of equity investment worth of N2 billion in the Bank by the LOLC GROUP from Sri Lanka.

By this investment, Fina Trust Microfinance Bank is adequately capitalised to meet the new capital requirement regulation of the Central Bank ahead of the April 2020 deadline.

In a circular signed by Kevin Amugo, director, financial policy and regulation department, the CBN explained that Unit Microfinance Banks shall operate in the urban and high-density banked areas of the society; and tier 2 Unit Microfinance Banks shall operate only in the rural, unbanked or underbanked areas.

To aid the process of recapitalization, the CBN had directed that all Tier 1 unit microfinance banks shall meet a N100 million capital threshold by April 2020 and N 200 million by April 2021; Tier 2 unit microfinance banks shall meet a N 35 million capital threshold by April 2020 and N 50 million by April 2021;  A state microfinance bank shall increase its capital to N500 million by April 2020 and N1 billion by April 2021; and A national microfinance bank shall hold a capital of 3.5 billion by April 2020 and N5 billion by April 2021.

Ashan Nissanka, country director of LOLC Group; a foremost Asian micro finance and leasing trailblazer, said that the Group is excited to invest in Nigeria as the investment is an access into sub Saharan Africa through the largest market in the region. LOLC Group has presence in more than 15 countries across Asia, MENA region. As part of the investment, LOLC Group is supporting the bank with strong micro finance skills and expertise that have been tested in the Asian market.

According to Deji Popoola, managing director/CEO of Fina Trust Microfinance Bank, this investment comes with a competitive edge for the bank through a funding costs efficiency, competitive process, system and technology, as well as innovative microfinance product offering. Deji is particularly appreciative of the LOLC family and the advisers who birthed the transaction.

The advisers to the transaction include Nolton Bravos/Sthenic Finance, Suits & Advisors, Banwo & Ighodalo and G. Elias & Co.

Ituah Ighodalo, Chairman of Fina Trust Microfinance Bank said, “Fina Trust Microfinance bank has been in business for the past 10 years. The Nigerian market is very big, very wide and we have reached a little bit of the capital that we have invested in the company and we needed to look for partners to do three things for us”.

One of such things he said is to bring in a bit more money to grow the business and expand it into a national business, which was the bank’s vision from the beginning.

Other things are to bring in technology and a bit of expertise into the business and to share with us the experiences they have had with other countries. “In looking for a partner, those were critical points for us,”Ighodalo said.

The chairman told BusinessDay that “LOLC thick these boxes. They brought in a considerable amount of investment into the company, a little bit of which we will use to buy off shareholders but most of it will be used to grow the business into a national business and a business that will also have footprint across Africa especially West Africa and that is what we are doing”.

Speaking further, he said, “I see us traversing the length and breadth of Nigeria, working together to infiltrate other parts of Africa and I see a big conglomerate being born. I am very excited. I am very optimistic. I have always been a believer that what Nigeria needs is technology and money. The market is there but what we lack is enough investible money in Nigeria because the economy has been stifled by inadequate government policies in the past. But now if money, technology comes in then the economy is ready to explode especially in the areas of agric, and small businesses”.

In July 2019, NPF Microfinance Bank Plc announced plans to do a public offer with a view to raising more funds from the Nigerian Stock Exchange (NSE) to shore up its working capital.

The regulator carried out examination of 490 microfinance banks in the last six months of 2018, which included the routine examination of 258 MFBs, special examination of 224 MFBs and income audit of eight MFBs designated as Systemically Important Financial Institutions (SIFIs).

The examination according to the Financial Stability Report (FSR) for December 2018, revealed some shortcomings such as high incidence of non-performing credits (above PAR of 5%); inadequate capitalization; absence of Capital Management Plans and weak strategic objectives; high operating costs; weak risk management practices; and poor corporate governance.

Source: businessday

Analysis: WAPIC is Running Out of Time

How do you spend N97 for every N100 of gross operating income generated? Scratch that, how do you post a profit of N1 billion, yet 90% of it came from the value of your investment in another company? WAPIC Insurance may have realised an impressive 129% rise in profits in the first 9 months of the year, but it still has questions to answer.  

The company released its 2019 9month results, posting a pre-tax profit of N1 billion up from N475 million reported the same period last year. Most of the profits (N984 million) however came from its investee associate, Coronation Capital. Back that out and its 9month profit was just N102 million. One could argue that insurance companies are expected to make money from investments in solid companies such as Coronation Capital. Despite this, its return on average equity was still disappointing. 

In its latest resultsReturn on Average Equity was a paltry 6% (8% annualized), significantly poor when you consider the company’s potentials. Unfortunately, this has been the case for years now. Return on Equity was 2% in 2018, 9% in 2017, 8% and 2% in 2016 and 2015 respectively. As you may have guessed, keeping costs down has been a major challenge.  

WAPIC Plc has significantly high operating expenses as a percentage of gross operating income. The company keeps 44% of insurance premiums net claims as underwriting profitsone of the best in the industry. Unfortunately, it spends all of it on operating expenses, most of which are hard to decipher.

In its expense breakdown, it lists about N817.5 million (2018 9Month: N405 million) as “office expenses” while another N131 million was listed as “annual dues”. Depreciation, a non-cash itemwas N317.8 million, reflective of holding on to assets that are not generating enough income to cover its amortized cost.  

Rising expenses have also been a bit of a norm at the digitally-focused insurance company. Between 2015 and 2018, operating expenses rose from N3 billion to N4.9 billion 63% or 17% annually. On the contrary, gross operating income rose by 26% over the 4-year period. Something needs to giveand very soon indeed. WAPIC announced a planned rights issue and looks to raise about N5 billion. This will inevitably increase its net assets if consummated, piling more pressure on its ability to deliver higher returns on equity.  

What does it need to do? It needs to sweat its assets better, starting from its long list of investment securities. Earning N3 billion on assets with a book value of N30 billion is simply not enough to cover its lofty expenses. Unfortunately, finding investments that deliver juicy returns to cover their costs is hard to find. The equities market is an aberration and government securities yielding get lower by the day. The alternative is to cut costs, which could be painful and grueling for employees.  Nevertheless, it needs to make a choicesooner rather than later. 

At 34kobo WAPIC and trading at 4x trailing earnings per share, the company has little room to wriggle if it prefers to value the stock higher. It’s currently down 15% in the last year and could remain the same till the end of the year. Investors who wish to buy the stock need to continue to demand that WAPIC does more about cost-cutting or grow revenues to fulfill its potentials. Most importantly, it’s running out of time. 

Source: Nairametrics

The Nigerian Code of Corporate Governance: Principle 24 – Business Conduct and Ethics

Corporate governance is an encompassing concept that defines the way a company or organisation is managed and controlled. It prescribes a set of rules which help companies imbibe and work towards transparency, accountability, honesty and openness. Good corporate governance provides proper incentives for the board and Management to pursue objectives that best serve the interest of the company and its stakeholders whilst also facilitating effective monitoring. It is now established that the adoption of good governance best practices largely determines the sustainability of corporations.

Analysing the importance of ethical compliance mechanisms, Surendra Arjoon, (a Professor of Business and Professional Ethics at the University of West Indies) made a distinction between the use of legal compliance and ethical mechanisms as tools for ensuring good governance. According to him, when legal mechanisms are introduced for the purpose of discipline, it can only promote a freedom of indifference to the letter of the law and may not necessarily inspire or instil excellence. Conversely, ethical compliance mechanisms promote a freedom for excellence which corresponds to the spirit of the law. Legal compliance mechanisms may not necessarily address the real and fundamental issues that inspire ethical behaviour.

Infusing good corporate governance practices into business operations entails establishing processes and policies that will ensure that the expectations of all stakeholders are met in a sustainable manner. Principle 24 of the Nigerian Code of Corporate Governance (NCCG, 2018) sets out certain standards and best practices on business conduct and ethics. The code suggests content for a standard Code of Business & Ethical Conduct (COBEC).

Typically, a COBEC seeks to promote a culture of ethics and compliance within the organisation and defines the way and manner in which the company conducts its business guided by its core values.  Whereas “engaging in business” speaks to activity, “business conduct” refers to the method by which such business should be conducted, and “ethics” refer to the principles and standards that guide the organisation’s business practices. Whilst providing Management with the flexibility to take on various business opportunities, defining professional business and ethical standards builds and safeguards corporate reputation and instils investor confidence.

The board of directors is expected to ensure compliance with the COBEC and that breaches are effectively sanctioned. This responsibility may be delegated to the nominations and governance committee.

“The establishment of professional business and ethical standards underscores the values for the protection and enhancement of the reputation of the company while promoting good conduct and investor confidence.”

A code of business and ethical conduct may be defined as a set of principles designed to guide stakeholders towards conducting business with integrity and in line with agreed rules defined by the organisation’s leadership. Investopedia notes that whilst many laws exist to set basic ethical standards within the business community, it is largely dependent upon a business’ leadership to develop a code of ethics for the organisation.

The NCCG code recommends that the COBEC should assert the importance of directors and senior management acting in good faith and in the best interest of the company within legal and defined ethical boundaries. The COBEC is expected to remind directors that whilst acting in their official capacity and exercising the powers attached to their office, they owe a fiduciary duty to the company and as such must conduct diligent analysis of all proposals before the board.

Directors are also expected to be guided in the appropriate use of confidential information and not take advantage of their position for personal gain or competition with the company. The COBEC must highlight the importance of reporting unlawful and unethical behaviour and the protection of those who report violations in good faith.

The COBEC should also be sufficiently detailed to provide clarity for its users and must be formally communicated to all internal and external stakeholders. To be effective and relevant, the COBEC should be reviewed regularly to incorporate new principles and fade out obsolete ones.

Housing Development

Companies are the most significant nucleus of modern economic activity. Whilst the ultimate objective is sustainable growth – reflected by profitability, these entities have a responsibility to ensure that they pursue and achieve this objective in an ethical manner. This responsibility requires a moral commitment driven by the board of directors which has the responsibility for the ethics and integrity standards that underpins how the company conducts its business.

The determination of what is right or wrong is universal and not subject to cultural and individual relativism and thus the test cannot be a subjective one. It has been argued that what is considered ethical is a product of an individual’s moral perspective. However, the collapse of organisations in recent times indicate that, irrespective of our relative perception of morality and ethics, failure to adopt appropriate business ethics in undertaking economic activities will not serve the interest of all stakeholders.

Source: Businessdayng

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