E-Financial
CBN Mulls New Credit Mechanism for Real Sector @ Single Digit
To encourage banks to give credit to the real sector of the economy, at single digit rates, the Central Bank of Nigeria (CBN), has offered to complement the effort of Deposit Money Banks (DMBs) through a mechanism to support banks that lend to corporate entities at single digit rate.
Addressing journalists at the end of the Monetary Policy Committee (MPC) Meeting in Abuja, which saw the retention of all monetary rates, the CBN Governor Mr Godwin Emefiele disclosed that the mechanism “is not meant to bring competition among Deposit Money Banks, but it is meant to complement their efforts.”
According to Emefiele, “the most important thing is that we want to see to it that we achieve a single digit rate. We believe this will work because rather than the banks keeping the money in the reserves they can key into this and promote these transactions as long as they meet the terms and conditions.”
Specifically, Emefiele said “a differentiated dynamic cash reserve requirement regime will be implemented to direct cheap long term bank credit at nine per cent and a minimum tenor of seven years and two years moratorium to the employment elastic sectors of the economy.”
Details of this framework he said are being worked out by the banking supervision and the monetary policy departments and will be released very soon stressing that more details on this new mechanism “will be provided soon for the banks and everybody to know.
MPC was concerned that credit to the economy was sliding and we looked at means to incentivize the Deposit Money Banks to increase credit to the real sector.”
The MPC was of the opinion that while it is difficult to encourage job creation in an environment within deficit infrastructure, the committee believes that the bank should continue to encourage Money Deposit Banks to increase the flow of credit to the real economy to consolidate economic recovery.
To achieve this, Emefiele noted that two approaches were considered: the first approach, in order to achieve the objective of lowering interest rate particularly to those priority sectors- manufacturing sectors, agric sector, the CBN “will encourage large corporates to issue commercial papers/note to the market and there will be a memorandum that will detail explanations of what they are going to do with that money.”
In order to complement the effort of the banks, the CBN he said “will expect that this commercial papers will come at low rate of single digit of 9 per cent or below that and for long tenor at least a period of 7 years with a specific purpose for that loan.”
If central bank sees that kind of notes in the market, Emefiele noted that the “CBN will complement the effort of the banks through a mechanism to support that bank that lends to that corporate at single digit rate.
It is not meant to bring competition in the money deposit banks, it is meant to complement their efforts. The most important thing is that we want to see to it that we achieve a single digit rate.”
The second approach he said is “if a bank lends money for new projects and planned expansions, verifiable not refinancing, to a project for seven years inclusive of two years moratorium at 9 percent interest rate, that the bank providing this evidence and verified by the central bank, we will go into that bank’s CRR and release equivalent of that cash from our CRR at zero kobo spread.”
Emefiele explained further that “in this case, that bank earns its 9 percent of that money. We feel this is novel; it is something that we should give a chance.
In the past we have reduced CRR and release liquidity into the market but the liquidity was not channeled properly to the high impact corporations – we mean employment generating sectors or output improving sector of the economy.”
Updating journalists on the Chinese Currency swap deal, the CBN Governor revealed that they “opened the first auction last week Friday and the result from that auction will be released on Friday, but from the preliminary information I heard is that it was a successful auction. The details will be unfolded by Friday.”
About the declining foreign reserves from $47.7 billion in May to $47.2 billion in June, Emefiele said “this has nothing to do with politics. What is happening is as a result of US Fed normalisation.
Since the interest rate has gone up in the US, and other advanced economies, in an attempt to stimulate their economies, these money that moved into the emerging economies have now being taken back and this means there will be so much outflow of cash than inflow of cashflow, and of course we have our own share of it.”
He noted that “Nigeria has performed better than other emerging market around the world, with a stabilized exchange rate that has remain stable because we have been able to build enough buffer to support our currency and that is why the exchange rate has remain stable.
Countries like South Africa and others have had their currencies depreciated but the Naira remains stable at N360/$ at this time.”
Speaking on the outcome of the MPC meeting in general, Emefiele said “MPC commended the approval of the Federal Government’s 2018 budget and called for the accelerated implementation to further support the fragile growth recovery.”
The committee also called for sustained implementation of the Economic Recovery and Growth Plan (ERGP) to further stimulate output growth.
However, the MPC was “concerned about the liquidity impact of the 2018 expansionary fiscal budget and increasing FAAC distributions due to rising prices of crude oil as well as the buildup in election related activities.”
Exactly two years after the MPC decided to hold rates at 14%, at the end of Tuesday’s meeting, MPC again voted to retain the: Monetary Policy Rate (MPR) at 14.0%; Cash Reserve Ratio (CRR) at 22.5%; Liquidity Ratio at 30.0%; and Asymmetric corridor at +200 and -500 basis points around the MPR.
Defending the MOC’s decision, Emefiele stated that “in the discussion for a hold, it was noted that risk to the macroeconomic and financial environment appears fairly balanced with improvement in output growth and inflation.”
Holding policy at the current stand he said “will support growth and further moderate inflation. However, committee noted the appetite of the public for loosening and concern that hold MPR at 14 per cent since July 2016 and considering the dynamic nature of the market, the rates might have lost its signal effect on the market, hence dampen market expectations.”
“The argument in favor of maintaining the current policy stand, is to monitor the magnitude of the liquidity impact of the fiscal injections and elections related expenditures ahead of the 2019 elections” he explained.
In a move to meet the Central Bank of Nigeria (CBN) new capital requirement, FCMB Group Plc, yesterday announced that it has successfully completed its public offer and raised about N147.5 billion from investing public.
The Group in a statement on the floor of the Nigerian Exchange Limited (NGX) stated N144.56 billion was absorbed through the issuance of 19,802,710,781 ordinary shares at N7.30 per share bringing total post-offer issued shares to 39,605,421,562 shares.
It added that the public offer was oversubscribed by 33 per cent amid high demand from investors.
The financial institution announced the completion of its public offer, following the approvals of the CBN and the Securities and Exchange Commission (SEC).
FCMB Group had issued 15,197,282,219 ordinary shares of 50 kobo each at N7.30 per ordinary share of N0.50kobo each to old and new investors.
The Company Secretary, FCMB Group, Mrs. Olufunmilayo Adedibu in a statement stated that the offer was oversubscribed by 33per cent, attracting 42,800 investors with 92per cent subscribing via more convenient digital channels such as the bank’s mobile app and ushering in over 39,000 new investors to the FCMB Group.
She said, “the total amount raised and verified by the regulatory authorities is N147,508,464,568.60 and N144,559,788,701.30 was absorbed through the issuance of 19,802,710,781 ordinary shares at N7.30 per share bringing total post-offer issued shares to 39,605,421,562 shares. Regulatory approvals have also been received to downstream the net proceeds of the public offer from the holding company to the banking subsidiary.
“This raises the paid-up share capital and share premium, being the eligible capital base as per CBN’s recapitalization criteria, of the banking subsidiary, First City Monument Bank Limited, to over N240 billion, which exceeds the minimum requirement for a national banking license.
“Subsequent phases (2 & 3) of FCMB Group’s capital program, which are currently underway, are aimed at ensuring First City Monument Bank Limited meets the minimum capital requirement to retain its international banking license in line with its vision to be a global financial services group of African origin, renowned for leadership in its chosen markets.
Commenting on the successful completion of the public offer, Mr. Ladi Balogun, the Group Chief Executive, FCMB Group, in a statement said, ““We are grateful to our existing shareholders and new investors for coming out strongly to support this offer.
“The success of the public offer reflects significant investor confidence in our strategy and growth potential, as well as trust in the board, leadership and our people to fulfill our commitments and realize this potential.
“We also extend our profound appreciation to the CBN, the SEC and the NGX for their continued foresight, innovation, guidance and support which has been instrumental in achieving this significant milestone.
“This marks an important step forward in our journey to unlock new opportunities, create value for our shareholders, and contribute to the economic growth of Nigeria and Africa. We remain committed to executing the subsequent phases of our capital-raising program in 2025.
Verve International, Africa’s pioneering and largest domestic payments scheme, has announced a significant new milestone, further solidifying its market dominance in Nigeria.
The company has now issued over 70 million payment cards in Nigeria, Africa’s largest consumer market.
This achievement comes just 15 months after Verve celebrated issuing 50 million cards, marking a remarkable 40% year-on-year growth in issuance volumes.
In recent years, Verve has become the preferred payment card across various banking services, especially within Nigeria’s burgeoning fintech and neobank sectors.
This success is attributed to Verve’s continuous innovation, deep understanding of local market needs, and strategic partnerships with commercial banks, microfinance institutions, fintech companies, other financial institutions (OFIs), and the public sector.
As Africa’s leading domestic payment card scheme, Verve is dedicated to addressing unique market challenges by offering secure and cost-effective payment solutions for individuals and businesses.
Verve provides both virtual and physical cards, enabling payments for a growing number of international services in local currency.
Over the past three years, Verve has achieved significant progress, securing merchant acceptance with global platforms such as Google, Spotify, Netflix, Showmax, Amazon Prime, Facebook, Microsoft, Uber, and Flywire.
These partnerships underscore Verve’s commitment to providing African users with convenient access to global services in local denominations.
Beyond Nigeria, Verve cardholders can use their cards in over 21 other African countries, ensuring seamless transactions across the continent.
Verve’s expanding partnerships in East Africa, including major financial institutions like KCB Group and Equity Bank, as well as a growing network of savings and credit societies (SACCOs) in Kenya and Uganda, highlight the company’s dedication to driving value and efficiency for African financial institutions.
Vincent Ogbunude, CEO of Verve International, expressed his excitement about this latest milestone, stating, “At Verve International, we continue to deliver global-standard payment solutions tailored to the economic and operational realities of African markets.
“We are delighted to celebrate this phenomenal achievement of adding 20 million new payment cards in Nigeria.
“We are grateful to our issuing partners and loyal cardholders for their support.”
Recently, Verve launched the fifth edition of its Goodlife National Consumer Promo, a reward program designed to engage and reward its millions of cardholders.
Running from August 15 to December 31, 2024, the promo offers instant discounts and rewards at selected merchants and retail outlets across Nigeria, including NNPC Retail Limited, Addide, The Place, Sweet Sensation, and Chowdeck.
As a subsidiary of the Interswitch Group, Africa’s leading integrated digital payments and commerce enabler, Verve International remains committed to pushing the boundaries of customer experience and payment possibilities.
Verve cards are trusted for their safety, convenience, and reliability, and can be used across a wide range of payment channels, including Point of Sale (POS) terminals, Automated Teller Machines (ATMs), agency banking channels, web/e-commerce, and mobile apps.
African Development Bank (AfDB) is set to start releasing a $2.2bn fund for the development of Special Agro-Industrial Process Zones in Nigeria (SAPZ).
Abdul Kamara, director general, AfDB Nigeria office, made this known during Channels Television’s 2024 End-Of-Year Review with the theme, ‘Focus on the Agriculture Sector, Food Security, Research and AfDB Investments’.
“Specifically, from next year (2025), we will see contracts signed and mobilization and construction on site will start in some states. Of course, not all the states will start together,” he said.
He said the money would be used for the development of agro-industrial hubs where processing will happen, aggregation centres and agricultural transformation programmes.
The developmental economist said though the Special Agro-Industrial Process Zones was approved by the AfDB Board in 2021, the project is picking up after startup delays attributed to several factors.
“When you approve a programme, you have to have it signed with the Federal Government, especially of that magnitude. You also have to have it signed with the co-financiers. The Bank had to bring in IFAD (International Fund for Agricultural Development) and Islamic Development Bank as co-financiers,” he said.
Kamara said when the Bank met with some state governors, months back, they agreed on certain actions to accelerate SAPZ.
“In all the seven states including the FCT, Cross River, Ogun, Oyo, Kaduna, Kano and Kwara, in each of the states, we are now in conversation with and are publishing the bidding document so that we’ll shorten the process. So, it’s picking up and that is not strange. Projects that are very complex
“That is even why at the African Investment Forum just concluded early this month, we had a pledge from different financiers to the tune of $2.2bn.
“So, the SAPZ is going to happen and it’s going to deliver as much as we have elsewhere.
“The value, give or take, what the Bank is putting in is about one billion dollars. Of course, if you add what others are bringing in, it will be more than that because we are a convener; we bring in others,” he said.
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