14 BUSINESS DAY C002D5556 Tuesday 06 March 2018 COMPANIES & MARKETS Banks’ capital adequacy could worsen on IFRS 9 BALA AUGIE Banks’ capital adequacy ratio may worsen as the adoption of the International Financial Reporting Standard (IFRS) 9 could force lenders to make more provisions for loans that were thitherto not recognized. We predicts that the capital adequacy ratio across the industry will probably drop by 100 to 200 basis points, mainly because of the introduction of IFRS 9 reporting standards, which will require higher provisioning,” said Muyiwa Oni, analysts at Stanbic IBTC Holdings Plc The introduction of these rules also have unintended consequences on the bank’s liquidity and margins. A sharp in oil price and a sever dollar shortage that tipped the country into its first recession in 25 years hindered customers from meeting their obligation. Analysts say some small and mid-sized banks will run into troubles this year because their capital adequacy levels as they continue to grapple with huge rising bad loans. The application of these new rules means loans that have not been classified as Non-Performing loans (NPLS) will now be classified and that could sour bad loans, according to Kunle Ezun, research economist at Ecobank Nigeria Limited. Renaissance Capital, an investment banking firm, was of the opinion that, the tier one banks, specifically, GTBank, Zenith, UBA and Access could see Cost of Risk (COR) Come in marginally higher in full year (FY) 2018 as a result of the adoption of the new standard A higher CoR means impairment charge will be high. IFRS 9 Financial Instruments issued on 24 July 2014 in Nigeria is the IASB’s replacement of IAS 39 Financial Instruments: Recognition and Measurement. The Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The IASB completed its project to replace IAS 39 in phases, adding to the standard as it completed each phase. The standard was introduced to make recognize expected credit losses on in a time manner as delay in recognizing such expenses contributed to the global financial crisis of 2008. But CFO Innovation and Strategic Intelligence, a research firms, said that IFRS 9 is principle based and it doesn’t provide any standard model for computing the Expected Credit Loss (ECL). The research institute added that another worry for CFOs is how to measure the impact of the adoption of the IFRS 9 on bottom lines (profit) as huge write offs and change the accounting and reporting system such as a general system of ledger and journal could further expose banks to huge costs. “In the Deloitte study, 81 percent of respondents in banks with over €100 billion in gross lending and 64 percent of all other respondents said they expect a significant impact on the volatility of the bank’s P&L account under IFRS 9 compared to IAS 39,” said the report. Banks in Africa’s most populous nation and largest economy are recovering from souring bad loans as the economy improved on the back of higher oil production and the apex bank’s new foreign exchange windows. The cumulative Impairment charge otherwise known as loan loss expense of 13 banks that have released Third quarter 2017 results dipped by 20.15 percent to N287.30 billion, from N359.82 billion the previous year, based on data gathered by BusinessDay. We estimate that NPLs will increase by up to 30 across assets classes on transition to IFRS 9,” said Gloria Fadipe, head of research of CSL Stock Brokers Limited. Ayodeji Ebo, managing director and CEO of Afrivest Limited, says he doesn’t expect the impact of the adoption of the new standard to be very serious because some of them have done scenario testing before now. ‘Rural women account for 80 percent of Nigeria’s food production’ ISAAC ANYAOGU Rural women accounts for 70 percent of agricultural labour, and 80 percent of food production in Nigeria, often through difficult circumstances says the Foundation for Partnership Initiatives in the Niger Delta (PIND), which is formed in partnership with Chevron. To this end, the PIND in collaboration with Cara Development Foundation and African Youth Development Foundation, will host over 120 rural women farmers in the Niger Delta to a town hall meeting on Tuesday March 6, to mark this year’s International Women’s Day. Themed ‘Time is Now: Transforming Lives of Rural Women in Small Businesses and Agriculture’, the outreach aims to showcase the contributions of these women farmers to the rural economy and draw attention to the constraints limiting them from maximizing the immense opportunities in their respective agricultural value chains. The townhall outreach will hold in Mezie Umukabia Ogodo Community in Ngor Okpala Local Government Council, Imo State where the Aladinmma Multi-Purpose Cooperative Society made up of over 200 women cassava farmers supported by PIND and its partners operate. They will be joined by Multi-Purpose Tax amnesty: A win-win for everybody SEYI JOHN SALAU Industry expert and Head, Tax,Regulatory and People Services, KPMG Nigeria, Wole Obayomi, said that the tax amnesty granted by the Federal Government through the Federal Inland Revenue Service (FIRS) under the Voluntary Assets and Income Declaration Scheme (VAIDS) is a win-win for the society and the government capable of scaling up FIRS tax revenue for the year. Speaking at the Institute of Directors (IoD) Nigeria, Members’ Evening with the theme ‘Voluntary Assets and Income Declaration Scheme (VAIDS) and Responsible Tax Practice’ held in Lagos recently, Obayomi said the scheme offers an option of paying outstanding tax over a 3-year period. According to him, the amnesty includes waiver of interest and penalty, immunity from tax audit, and prosecution for tax offenses. “Taxpayers taking advantage of the Scheme are entitled to certain benefits in exchange Cooperative farmers’ Association also from Mezie Umukabia Ogodo and Eziorsu Palm Oil Farmers Association in Oguta. The outreach will also have the media, government representatives, legislators and agricultural service providers in attendance to engage with the women. During the outreach, the rural women farmers will interact with the media, government, elected representatives and service providers to tell their stories and speak about their needs and concerns. The forum will provide a platform for the stakeholders present to appreciate the contributions of the women farmers and to collectively deliberate on how to improve support to the women. for full, honest and verifiable declaration of their assets and income, and paying up their resulting tax liabilities,” said Obayomi. Obayomi however posit that the key focus of the KPMG tax practices is to support it clients. “In all areas of our work we apply uncompromising professional standards. KPMG’s Global Principles for a Responsible Tax Practice are the foundation of expected standards and conduct,” he stated. Babatunde Fowler, Executive Chairman, Federal Inland Revenue Services About 40 percent of women in the Niger Delta are in agriculture and through this outreach awareness, PIND wants to shine the spotlight on these women and attract key stakeholders to take actions that will help to boost productivity and profits for them and grow their farming and small businesses. PIND was established by Chevron in 2010 with a mission to build partnerships for peace and equitable economic development in the Niger Delta region of Nigeria. The objective of these partnerships is to reduce poverty and increase socio-economic benefits by implementing interventions that address the root causes of conflict and poverty in a localized and sustainable manner. (FIRS), guest speaker for the night said VAIDS will provide an opportunity to increase tax awareness and compliance among the public, in addition to raising FIRS tax revenue for the period of its operation. According to him, the sharp drop in oil revenue necessitated the renewed vigor for non-oil tax revenue for the country. “It is a known fact that the decline in oil revenue contribution since 2014 to date has had an adverse effect on the ability of the country to meet her development objectives,” said Fowler. CubeHub: New virtual office provider debuts in Lagos Modestus Anaesoronye The Nigerian virtual and serviced office market has recorded another addition with the entry of Cubehub Nigeria. Determined to change the rigid nature of many office spaceswhich does not work for many flexibility-driven business models, CubeHubNigeria, is bringing to the market, flexible and customercentric office space and virtual services. Ajibola Adeboye, chief executive officer, Cubhub Nigeria, stated that the virtual and serviced office spaces would cater for every kind of business, ranging from startups to well established firms, adding that the firm was built on respect, integrity, teamwork and excellence. “We are really delighted to have started this journey to solve the high cost of office space solutions so that the economy drivers; the SME’s and start-ups can also play and thrive with the Large corporates within the Nigerian economy for a start as we grow with our clientsinto other economies of the world,” he said. Adeboye also revealed that Cubehub’s presence in the serviced office sphere is set to eliminate the overhead cost of building or leasing an office for long duration, furnishing, office supplies etc.He said the company will take that burden off users for a fraction of the cost, while they focus on the core of their business. “With Cubehub, you get to own a business address, use an office whenever the need arises for hours, days, weeks, months or years. You also get to use meeting rooms, have personalized phone numbers, dedicated call agent, professional staff to uphold the image of your business while you can also work from home. It is up to you to define how you want to work,” the Cubhub Boss explained. According to the guest speaker, GossyUkanwoke, FounderBeni American University, “CubeHub is a tastefully furnished to help many businesses in the Ikeja axis grow while keeping costs low. Its proximity to the international and local airports means business people from out of town can easily find space to work from.” Cube Hub virtual services are for people who want business addresses, courier handling services, customer service personnel among other services without necessarily being in a physical office whilethe serviced office entails having a fully serviced office space/meeting room.
Tuesday 06 March 2018 BUSINESS DAY 15