11 Oct

Daily Watch – Nigerian banking in “full-blown crisis,” Kaduna ramps up budget ambitions

  • Fifty customers owe commercial banks a total of ₦5.23 trillion, representing 33.4 percent of the total private sector credit exposure of ₦15.68 trillion, the CBN’s Financial System Stability report shows. “The total exposure to the top 50 obligors stood at ₦5.23 trillion (33.4 percent) of total industry credit exposure of ₦15.68 trillion,” the regulator said in the report. Although the report did not give the identities of the 50 big bank debtors, it indicated that non-performing loans in the period under review grew by 158 per cent from ₦649.63 billion at end-December 2015, to ₦1.678 trillion at end-June 2016. The NPL ratio rose to 11.7 percent from 5.3 percent, thus exceeding the prudential limit of 5.0 percent. It also said that as at the end of June, loans to oil and gas sector by the banking sector had hit ₦4.5 trillion, representing 28.77 percent of the total industry burden.
  • Nigeria’s banking industry is experiencing a “full-blown financial crisis” as failed fiscal and monetary policies lead to a credit crunch, according to Arqaam Capital. Unity Bank and Skye Bank are close to being insolvent while lenders FBN Holdings and Sterling Bank “will need a dilutive capital hike,” Jaap Meijer and Tarek Sleiman, analysts at the Dubai-based investment bank and brokerage, said in an e-mailed note on Monday. Banks’ capital ratios are set to worsen because of currency depreciation and souring loans, they said. The CBN in July replaced the management of Skye after the lender breached liquidity thresholds, spurring concerns about the health of small- and medium-sized lenders, and reviving memories of bank rescues by the government after the financial crisis in 2009. Nigerian banks are grappling with a devaluation of the currency, rising bad loans and an oil-dependent economy that’s set to record its first annual contraction in more than two decades.
  • The NCC’s Executive Vice-Chairman, Umar Danbatta has said that Nigeria has achieved more than 20 percent broadband penetration as disclosed by the International Telecommunications Union. Danbatta said the active total subscribers in the network has surpassed 152 million, with Internet penetration of more than 97 million, a situation which Danbatta says illustrates the industry’s resilience. The new figure signifies that the country is inching closer to its target of 30 percent penetration by 2018 as set by the National Broadband Strategy Report.
  • Kaduna’s government has proposed a draft budget of ₦189.9 billion for the 2017 fiscal year. Addressing a town hall meeting of residents, Governor Nasir el-Rufai, said the meeting was aimed at obtaining citizen’s input into the document before its presentation to the state House of Assembly. According to the el-Rufai, Kaduna introduced a zero-based budget paradigm to ensure the new budget is anchored on reality. The 2017 budget is ₦17 billion higher than the 2016 spending plan.
  • United Capital recorded a ₦4.7 billion profit after tax up from ₦1.6 billion in the prior nine months of 2015. This was contained in the nine-month unaudited results filed at the NSE. The group’s result in the nine months of 2016 showed a profit before tax of ₦3.96 billion, indicating a growth of 65 percent from ₦2.4 billion. The company’s gross earnings rose by 39 percent to ₦5.7 billion in Q3 2016, from ₦4.1 billion posted in the corresponding period of 2015. Investment income rose from ₦491 million to ₦2.6 billion, while fees and commission income grew from ₦1.1 billion to ₦1.4 billion.
  • Royal Exchange’s net claims settlement rose by 25 percent to ₦3.04 billion in the 2015 financial period from ₦2.43 billion in 2014. Group chairman, Kenneth Odogwu, during the company’s AGM, said that “In spite of the hostile operating environment experienced by the insurance sub-sector and the financial services industry, in general, Royal Exchange Group kept a tight rein on its business in 2015.” During the period under review, he said the group’s gross written premium rose by 14 percent to ₦10.79 billion from ₦9.43 billion in 2014. Odogwu said the board did not recommend a dividend payment for 2015 due to the IFRS-induced reserves it made from the profit or loss account.