19082019 - Nigeria to spend N2.53bn on 43 ministers

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22 — Vanguard, MONDAY,AUGUST 19, 2019 FINANCIAL VANGUARD Banks lose N1.1trn <strong>to</strong> IFRS 9 rule on bad loans By Babajide Komolafe THE banking industry lost N1.1 trillion in <strong>to</strong>tal assets as a result of compliance with the requirements of the International Financial Reporting Standard (IFRS) 9 on recognition of bad loans. Among others IFRS 9 mandates that banks estimate and book an upfront, forwardlooking expected loss over the life of the any loan granted and moni<strong>to</strong>r for possible default. This resulted <strong>to</strong> increase in provision for bad loans (impairment for credit losses) by banks. The above requirement, according <strong>to</strong> Agus<strong>to</strong> & Co, <strong>Nigeria</strong>’s leading bank rating firm, led <strong>to</strong> loss of N1.1 trillion in <strong>to</strong>tal assets by the <strong>Nigeria</strong> banking industry in 2018. Agus<strong>to</strong> & Co analyst, Ada Ufomadu, disclosed this while presenting the company’s report on the <strong>Nigeria</strong> Banking Industry. She said: “In 2018 the assets of the banking industry was about N33.3 trillion and we think in 2019 growth will be driven largely by the fact a lot of banks are raising capital. In 2018 there was the IFRS 9 accounting principle that was introduced <strong>to</strong> the banking industry and it had significant impact on capital. The industry lost about N1.1 trillion from banks’ capital. So what we are seeing now is that banks are trying <strong>to</strong> recoup these losses, banks are raising Tier 2 capital. Some banks have come <strong>to</strong> the market <strong>to</strong> raise capital in form of Tier 2 bonds. So we think that will be a major driver of assets in 2019.” Speaking on the company’s outlook for loan growth in 2019 against the backdrop of the minimum Loan <strong>to</strong> Deposit Ratio (LDR) of 60 percent recently ordered by the Central Bank of <strong>Nigeria</strong>, CBN, Ufomadu said, “We don’t think that banks will lend more <strong>to</strong> meet the 60 percent LDR because of the credit risk involved. As a bank, I don’t think they will just start giving out loans because they are trying <strong>to</strong> meet with regula<strong>to</strong>ry requirement. “At Agus<strong>to</strong> & Co, we believe that there might likely be an extension of the deadline for meeting the LDR. We see banks responding by reducing their deposit base because that is an easy way <strong>to</strong> meet up with the LDR, and what this means is that since it is likely that banks will be rejecting some deposits, interest rate on deposit will likely reduce, so interest expense for banks may reduce “Some people also believe that this might lead <strong>to</strong> a pricing war, with competition for premium borrowers. That is according <strong>to</strong> a school of thought, but generally we don’t believe there will be a significant increase in the loan book of the banking industry.” On the company’s outlook for the exchange rate and government borrowing activities and its impact on interest rate, she said: “We don’t think there will be naira devaluation because crude oil price is still relatively high and the CBN is well equipped <strong>to</strong> defend the naira. “We see increase in government borrowing. We still believe that the crowding out effect which the CBN is trying <strong>to</strong> avoid will occur. We believe that the private sec<strong>to</strong>r will be crowded out because the government will still need <strong>to</strong> borrow and that will have an impact on interest rate. So we think interest rate will remain high.” From left, Adesola Adeduntan, Chief Executive Officer, First Bank of <strong>Nigeria</strong> Limited; Kofo Akinkugbe,ManagingDirec<strong>to</strong>r,SecureID Limited and Seyi Oyefeso, Group Executive, Commercial Banking Group, First Bank of <strong>Nigeria</strong> Limited during the bank’s delegation recent visit <strong>to</strong> SecureID Limited’s Smart Card Manufacturing plant in Lagos. CBN <strong>to</strong> disburse lower Naira denominations through microfinance banks THE Central Bank of <strong>Nigeria</strong> (CBN) has released guidelines for the disbursement of lower denominations of the naira through microfinance banks (MFBs) across the country. A circular issued by the Direc<strong>to</strong>r, Currency Operations Department of the apex bank, Mrs. Patricia Eleje, indicated that all microfinance banks must have a composite risk rating (CRR) of above average in the most recent Risk Based Supervision (RBS) target examination before they are considered for the scheme. This, according <strong>to</strong> the CBN, was <strong>to</strong> ensure that only MfBs with good corporate governance practices take part. Meanwhile, the participating MfBs must be willing <strong>to</strong> accept a mixture of EDFIN Microfinance Bank, MfB, has signed a partnership agreement with the Sustainable Education and Enterprise Development, SEED, <strong>to</strong> enhance quality of education in Lagos State. Speaking on the partnership, Managing Direc<strong>to</strong>r of SEED, Mrs Olarenwaju Olayitan, stated: “I am so glad <strong>to</strong> be signing this first of a kind agreement. We are concerned about improving quality of education. The quality educational services is what we are bringing on board <strong>to</strong> work with Edfin. So it new and other banknotes, and that the MfBs shall give 20 percent of any withdrawal in lower denomination notes MfBs shall give 20 percent of any withdrawal in lower denomination notes subject <strong>to</strong> a maximum of N50,000 subject <strong>to</strong> a maximum of N50,000. Where beneficiaries withdraw more than once in a Edfin MfB partners SEED is not just about finance, it is now finance plus support, its finance beyond just money, it is how the money is working for the schools <strong>to</strong> improve the quality and eventually learning.” Managing Direc<strong>to</strong>r of Edfin MfB, Mrs Bunmi Lawson stated: “Our concentration is on affordable private schools that serve low income group and majority of them Lagosians. A study has shown that most families in Lagos State actually send their children <strong>to</strong> private schools as <strong>to</strong> oppose <strong>to</strong> public schools. You would see that the day, the circular said that disbursement will only apply <strong>to</strong> one transaction per day. Similarly, the MFBs are allowed <strong>to</strong> exchange notes subject <strong>to</strong> a maximum of N50,000 for cus<strong>to</strong>mers with bank accounts and N10,000 for cus<strong>to</strong>mers without bank accounts. In that situation, the banks must not exchange for same beneficiaries more than once a week. Also, MFBs are <strong>to</strong> maintain a register of amounts received from the CBN through their correspondent commercial banks. The MFB must also maintain another register of the beneficiaries of the lower denomination notes as well as ensure that withdrawal teller slips contain breakdown of the denomination of the currency <strong>to</strong> cus<strong>to</strong>mers with accounts. public schools are adequately handled by government across board. We need <strong>to</strong> see a general improvement in quality of education, we would, however, extend some of our services <strong>to</strong> public schools as well. We also have advocacies where we talk with government <strong>to</strong> ensure that they are putting in place proper policies <strong>to</strong> help improve the quality of education generally.” Also speaking on the uniqueness of Edfin’s focus, Lawson stated: “I have not yet come across any bank, microfinance or otherwise, that Ecobank engages new set of graduates in training E COBANK <strong>Nigeria</strong> through its training academy has commenced entry level development programme for new set of Graduate Trainees. A statement from the bank said the training programme is an intensive eight-week medley of learning interventions for fresh graduates. The first set of 67 trainees will graduate at the end of the month and will be absorbed in<strong>to</strong> different roles in the bank. According <strong>to</strong> the Head, Human Resources, Ecobank <strong>Nigeria</strong>, Gloria Byamugisha, the first set of trainees at the academy demonstrated a high level of commitment and orientation <strong>to</strong>wards the banking profession, noting that the training is essentially <strong>to</strong> improve the financial literacy of participants who may be coming from other disciplines, or who may have non-financial and banking related academic backgrounds. She further explained that the training combines classroom, onthe-job, book reading and action learning models, which provides the participants with global exposure and ability <strong>to</strong> compete internationally. Commenting, Managing Direc<strong>to</strong>r, Ecobank <strong>Nigeria</strong>, Patrick Akinwuntan said the training programme was in line with the transformation agenda <strong>to</strong> make the bank the most preferred financial institution in the country, noting the Ecobank will continue <strong>to</strong> head hunt for brilliant fresh graduates, train them on professionalism and Ecobank culture and inject them in<strong>to</strong> its workforce. He further explained that the various bank’s development programmes are part of its talent development strategy <strong>to</strong> continue <strong>to</strong> churn out excellently trained banking professionals at various levels of the industry <strong>to</strong> feed in<strong>to</strong> her talent pipeline and the banking industry, stating that they are founded on global best practice that prepare the participants for banking careers in positions aligned with their potential, competencies and experience at the entry point of functional pre-managerial roles. does what Edfin do. We are the first specialized education finance bank in <strong>Nigeria</strong>. We finance the education eco system, not only schools, from pre primary <strong>to</strong> university, <strong>to</strong> school owners themselves, so they can expand education. “We also provide loans <strong>to</strong> teachers and administrative staff, then vendors, organizations like SEED who supply services <strong>to</strong> schools, and then <strong>to</strong> parents and pupils who want <strong>to</strong> pay for their children tuition fees and all of that.”
FINANCIAL VANGUARD Vanguard, MONDAY, AUGUST 19, 2019 — 23 BANKING INTERVIEW BUSINESS LOAN & MORE: Access Bank offers collateral-free loans, business support <strong>to</strong> SMEs The Emerging Business Team of Access Bank led by Mrs. Ayo Olojede discusses how small and medium enterprises can get financial and other supports from Access Bank, especially business loan without collateral. Excerpt: CAN you briefly let us in<strong>to</strong> the offerings of the Access Bank Emerging Business proposition? At Access Bank we are very passionate about supporting SMEs and our solution is a convergence of the ecosystem of offerings that is aligned with the challenges that SMEs face. What are those challenges? Challenges that bothering on business management practices, capacity building, marketing and selling of their products or services, and the icing for us is their access <strong>to</strong> finance. We have designed our entire proposition in such a way that when you are banking with us, everything that keeps you up at night, all of the pain points in running your business smoothly, we are able <strong>to</strong> handle them for you. That is what our Emerging Business offering is all about. The latest SMEDAN (Small and Medium Enterprises Development Agency of <strong>Nigeria</strong>) and NBS (National Bureau of Statistics) reports noted that we now have over 41 million businesses nationwide, in the category of micro, small and medium enterprises, MSMEs; How does the bank cater for the banking needs of the different segments? At Access Bank, we first of all understand the diverseness of SMEs; with that we have dimensioned them based on their needs, their demography, their business turnover and sizes. We have specific products tailored <strong>to</strong> cater <strong>to</strong> each of the segment. We have what we call the growing business, the basic business and the established SME. For the growing business we know that some of them are not structured, they are unregistered; So we have partnered with law firms <strong>to</strong> register their businesses for them and also give them the opportunity <strong>to</strong> run a business bank account. Another thing we do is that we help them with cost savings and we’ve categorise them as people who have turnover of between N50 and N180 million. Most times if they are going <strong>to</strong> run their business based on that turnover, some of them will <strong>spend</strong> as high as N12,000 on CoT. But at Access Bank, we just have a fixed subscription fee of four thousand naira. So if you do the calculations, you will see that we are giving them up <strong>to</strong> 70% of cost savings so that they can channel their funds <strong>to</strong> other aspects of the business. We have the people we consider the established business. We also provide the opportunity of cost savings of up <strong>to</strong> 85%. This is part of our strategy in the Emerging Business. We provide cus<strong>to</strong>mers the opportunity <strong>to</strong> run their business, grow their business and support them through other innovative products. Like those in the import, they form queue and the batch FX where a cus<strong>to</strong>mer can build up funds and make a bulk transfer if up <strong>to</strong> $50,000. This is what we do at Access Bank <strong>to</strong> support our SMEs. You have positioned your product as providing more than banking solutions, what can you offer SMEs beyond the regular banking services? It is about adding value <strong>to</strong> our cus<strong>to</strong>mers’ businesses because we want <strong>to</strong> help the businesses grow. We have realized that it is not just finance that these businesses need; They need <strong>to</strong> build capacity. So we have a lot of initiatives tailored <strong>to</strong>wards building their capacity. We have a lot of trainings, we have seminars, workshops and we have partnered with a lot of industry specialist, both international and local and we’ve seen that this has been very helpful in helping their businesses grow. Apart from these we also have technological offerings for SMEs, because we realised that there is need for their businesses <strong>to</strong> be efficient and effective. We thought; what other way can they achieve that than being in tune with technology? So we have different supports like website design that we offer <strong>to</strong> our Emerging Business cus<strong>to</strong>mers. We also have a business Ayo Olojede, Group Head, Emerging Business Chioma Ogwo, Head, Non- Financial Services management solution which we offer them. These packages are severely discounted. Access <strong>to</strong> finance is widely regarded as the major challenge for most MSMEs in <strong>Nigeria</strong>, Generally, people talk about how access <strong>to</strong> finance is the biggest challenge SMEs face with the growth of their businesses; but most of them have challenge of poor finance records what is Access Bank doing for small businesses in this regard? At the heart of what we do are our loan offerings for our cus<strong>to</strong>mers. We realised that it is simply not possible for business owners <strong>to</strong> scale up their business drawing funds from their pocket. As your business grows, you will need money <strong>to</strong> hire new employees, <strong>to</strong> purchase new equipment and open new branches in other locations. So it is important that as a business owner you begin <strong>to</strong> consider the various financing options that is available <strong>to</strong> you and how you can position yourself <strong>to</strong> make sure you are able <strong>to</strong> access that finance. Let me quickly talk about why banks say no <strong>to</strong> SMEs. Generally, Thelma Luke-Nwoye, Head, Liabilities Emerging Businesses people talk about how access <strong>to</strong> finance is the biggest challenge SMEs face with the growth of their businesses. But most of them have challenge of poor finance records, misalignment with the cash flow, not knowing which portion of sales proceed is their profit. Most of them also have challenges with collateral. What we have done at Access Bank is that we have invested in a specific lending assessment method that takes care of all of these challenges. As a result we are able <strong>to</strong> lend <strong>to</strong> cus<strong>to</strong>mers who are new <strong>to</strong> borrowing and who have never taken our facilities before. With this we have been able <strong>to</strong> assist SMEs who ordinarily would not have been able <strong>to</strong> access finance. Our requirements are very relaxed. We have loans like MediLoan that is collateral-free. We also can ask for flexible collateral option based on what you want and we leverage the National Collateral Registry <strong>to</strong> be able <strong>to</strong> register such as asset. We have lending officers who will also engage you, and in the course of engaging with you, they help you through building up a balance sheet, financial statement and cash flow that adjust all of your household expenses - the reason being that most SMEs have one pocket, everything that they make goes in<strong>to</strong> one pocket. In the course of putting everything <strong>to</strong>gether, we will be able <strong>to</strong> differentiate what you are <strong>to</strong> <strong>spend</strong> on your household and what goes in<strong>to</strong> your business and what amount of money is free that you can reinvest in<strong>to</strong> your business. On that basis, we determine your loan requirements. Whether you are a school owner, a health practitioner or you are in<strong>to</strong> IT, or any other business you can access up <strong>to</strong> N10 million without collateral. All of the value chain in the health sec<strong>to</strong>r we are able <strong>to</strong> support and additionally provide advisory support through our partnership with Medical Credit Fund (MCF). They will help you as a doc<strong>to</strong>r or pharmacists see your practice as a business. What do SMEs require in order <strong>to</strong> access a loan from your bank? Do I need <strong>to</strong> be a cus<strong>to</strong>mer of the Bank? You don’t need <strong>to</strong> have an account with us. We will first of all do a credit check on you <strong>to</strong> know your credit score. If it is clean, we will then proceed <strong>to</strong> demand for your business records. If these two things are fine, you are close <strong>to</strong> qualifying for a loan. We are not looking for the things that banks generally require. But the good thing about us is that, if you don’t have these things, we work with you <strong>to</strong> help you achieve them all. But note that when you eventually qualify <strong>to</strong> get the loan. Tell us about your specific loan offerings for SMEs in Health, Technology and Education. We have MediLoan for pharmacists, hospitals and diagnostic centres. This loan is available for different things like, working capital, equipment financing and expansion. It is a very flexible loan, if you ask for three million; we won’t ask you for any collateral at all. We can lend as much as three hundred and fifty million <strong>to</strong> buy equipment because we know how expensive medical equipments are. Our partnership with Medical Credit Fund (MCF) allows us <strong>to</strong> offer technical assistance <strong>to</strong> our cus<strong>to</strong>mers. Medical practitioners have a quality standard rating for operating. Our partnership with MCF allows them come in<strong>to</strong> our cus<strong>to</strong>mers’ facility and help them attain a high quality standard in healthcare. We also have a loan for schools. The loan is tailored for people who are in the business of running schools. The account for schools is called ‘The Diamond School Advantage’, DSA. This account gives school owners the advantage of collateral free loan <strong>to</strong> buy equipment, renovate their schools and also working capital. We have the creative sec<strong>to</strong>r loan. Through the CBN onlending initiative targeted at the Creative sec<strong>to</strong>r, Access Bank supports businesses in the fashion industry, IT, Movie and Music production. You can enjoy up <strong>to</strong> N500million at a discounted interest rate of 9% for repayment duration of up <strong>to</strong> 10 years. Access Bank is really passionate about growing the engine of the economy which SMEs represent.
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19082019 - Nigeria to spend N2.53bn on 43 ministers

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