27 Apr

Daily Watch – Herdsmen attacks affect manufacturers, TSA may be in trouble

  • BusinessDay is reporting that attacks by herdsmen across Nigeria’s Middle Belt and some Southern states, coupled with the foreign exchange scarcity, have worsened the plight of manufacturers who are already facing a myriad of crises. Recent attacks in Adamawa, Benue, Ekiti, Enugu, Ondo and Rivers have led to the sacking of farmers and destruction of agro raw materials such as oranges, mangoes, pineapples, cassava, pears, tomatoes, grains, oil seeds, wheat and other commodities that serve as inputs for manufacturers in the food and beverage industry. Some fruit juice and starch manufacturers in Benue who often sourced oranges, pine apples, cassava and yam from Agatu and its neighbours say they now have to source raw materials from outside the crisis area, prompting them to spend more on input. The foreign exchange crisis in the economy has also cut industrial inputs, as manufacturers struggle to import the needed inputs, owing to their inability to get foreign exchange at the official rate. According to a Mercy Corps 2015 report, Nigeria loses about N453 million annually to herdsmen’s attacks. States where the conflicts take place lose an average of 47 percent of tax generated internally. SBM Intelligence had in 2015 published a report on the economic implications of the Middle Belt crisis.
  • FBN Holdings, Nigeria’s largest lender is at the brink of a major credit collapse as non-performing loans hit 18.9 percent, crossing the 5 percent threshold set by regulators. This follows the release of the bank’ much awaited 2015 full year results which the bank had warned will be materially lower than its 2014 results. The lender’s net income dipped by 82 percent to N15.10 billion to end the 2015 financial year much lower (based on audited financial statements), than December 2014’s N84 billion. The sharp drop was largely attributed to a 361 percent rise in impairment charge for credit losses to N119.30 billion. Impairment charges or loan loss expenses occur when it is probable that a bank will be unable to collect all or some of the amounts due, including the contractual interest and principal payments under a loan agreement. An impairment charge is thus an admission by the bank that a sum of N119.3 billion out of its total loans of N2.2 trillion may not be recoverable.
  • The Nigeria Liquefied Natural Gas Limited has shifted focus to Asia, with Japan emerging as one of its biggest markets. This is with the discovery of shale gas in the United States. The CEO of NLNG, Babs Omotowa, said recently that when the Nigeria LNG opened shop 15 years ago, the US was one of its biggest markets, but with the discovery of shale gas, US didn’t need LNG and by 2008, the NLNG’s market share there dropped substantially, adding that at the moment, the US accounts for less than one percent of its market.
  • Another BusinessDay report says that the Treasury Single Account formulated to shield government resources from pilfering may be in trouble, following hints that lenders are planning to stop the use of their platforms for TSA. The banks are unhappy regarding the one percent transaction charge, based on the use of Remita, an e-payment and e-collection software, on their platforms. From the transaction charge, 10 percent goes to the CBN; 40 percent goes to banks; while 50 percent goes to SystemSpecs, developers of Remita. A short time ago, the Senate passed a resolution asking the FG to terminate the 2013 contract between the CBN and SystemSpecs. The Senate had resolved to halt further deductions the Federal Government could have paid of the N25 billion contract sum to the platform provider, based on the charge of one percent transaction fee for all collections. The Senate also asked the CBN to ensure that the total refund of the portion of the deductions were retained by the CBN and the Deposit Money Banks, (DMBs) and that evidence of compliance be to the appropriate Senate committee. However, the banks, and SystemSpecs, have argued that the one percent is fair, as the CBN governor during the senate hearing admitted that the next best alternative was priced at 1.9 percent which is a foreign software, thereby negating the spirit of boosting indigenous capacity and the made in Nigeria campaign, a source close to this development said.