14 Oct

Daily Watch – First Bank is last man standing in FX market, VAT to help in NE rebuild

  • The crude oil production figure provided by Nigeria to OPEC for September was 139,000 bpd lower than the estimate from secondary sources. Nigeria, which lost the Africa’s top oil producer status in March, produced less crude oil than its rival, Angola, in September, according to OPEC. OPEC, in its latest monthly oil report released on Wednesday, said Nigeria’s oil output rose by 280,700 bpd to 1.385 million bpd in September, compared to Angola’s 1.649 million bpd. The country produced 1.524 million bpd in September, up from 1.429 million bpd in August, according to secondary sources. According to Bloomberg, of OPEC’s 14 member countries, Iraq and Venezuela are the only two that have publicly criticised the sources’ figures. Yet, there are five others whose own estimates are higher than those provided by secondary sources. Three nations – Angola, Nigeria and Qatar – provided estimates that are lower.
  • The Senate has approved the allocation of three percent of Value Added Tax (VAT) proceeds accruable to the Federal Government over the next 10 years for the rebuilding of the North-East. This was the adoption of the recommendation of the Ad hoc Committee on North-East Development Commission Bill, which also proposed that the commission be headquartered in Borno. In June, when the Bill came for third reading, the twin issues of allocation and headquarters of the commission stalled its consideration. With the adoption of the committee’s recommendation, the funding of the commission will also include 15 per cent of allocation to the six North-East states as well as a 50 per cent deduction of the ecological fund due to the six North-East states.
  • The CBN has raised concerns about what it called the indiscriminate and suspicious manner some bank customers are spending dollars and other foreign currencies abroad through their naira debit cards. The regulator said it had through the Bankers’ Committee concluded that bank customers who spent above the $50,000 annual forex limit it imposed would be barred from the nation’s forex market. Also, the regulator’s Banking Supervision director, Tokunbo Martins, criticised a report by a Dubai-based investment bank, Arqaam Capital, that seven of the nation’s banks have inadequate capital. The firm had said seven Nigerian banks were undercapitalised with two of them close to insolvency. Martins said Nigerian banks were facing significant economic headwinds but had strong capital buffers to weather the storm.
  • The CBN has suspended all banks, save for First Bank, from selling IMTS dollar proceeds to BDCs, reversing an earlier directive from August. The CBN had directed banks to sell proceeds of their international money transfer services to BDCs in a bid to address the steady and sharp depreciation of the naira in the parallel market. Regulatory checks showed that most of the banks were either not complying or actively circumventing this directive, preferring to do “brisk business” with the proceeds, leading to a call by the Association of Bureaux De Change Operators of Nigeria to demand a policy review. An unnamed top placed official told Vanguard that, “We discovered that all the banks were not selling to the BDCs, while a few that did so occasionally short-changed them by selling at a higher margin. The only exception was First Bank, which had 500 BDCs and sold to them on regular basis. So we decided that since the bank was selling the dollars as directed, we would allow it to continue to do so.”
  • Global risk rating agency, Fitch Ratings, says Nigerian banks were experiencing a sharp rise in NPLs. However, the agency added that in isolation, asset-quality deterioration was not yet a negative driver for the 11 commercial banks in Nigeria that are under its ratings, while the downturn in the economy, which precipitated the NPLs, would see a reprieve next year. The CBN’s latest financial stability report said banks’ NPLs rose to 11.7 percent of gross loans at end-June 2016 from 5.3 percent at end-2015. Reacting to this development, Fitch stated: “This exceeds our start-of-year expectations for a 10 percent NPL ratio by end-2016.” It, however, noted that “NPLs are not evenly spread among banks and sector NPL ratios are distorted by some exceptionally high concentrations. The firm named other key concerns as “tightening foreign currency (FC) liquidity, weakening capital adequacy ratios and the sovereign’s ability to support banks, given its weaker financial flexibility.” It did warn that if current challenges do not ease, the banks could face further downgrades.
  • The Jos Electricity Distribution Company says it has spent about ₦8 billion to provide new meters in four states: Plateau, Gombe, Bauchi and Benue. According to the company’s MD, Modibbo Gidado Muhammad, JED has installed about 11,000 meters in the aforementioned states and the company would install 100,000 more meters before the end of this year and 50% of its customers would be metered before January 2017 despite having millions of customers. This comes amid new data that shows that about nine DisCos may instal prepaid meters for 215,133 customers by the end of October. NERC had earlier this year, directed the 11 DisCos to provide monthly updates on their metering plans and implementation to enable it monitor the speed at which customers were metered while addressing the many complaints on estimated billings. Data on Abuja’s AEDC metering plan indicate that of a 2016 target of 111,500 meters, 15,000 customers would have meters this month, bringing its meter deployment to 81,500. “This plan is, however, subject to modifications as necessitated by prevailing conditions,” the DisCo said on its website. Eko DisCo said it is targeting 150,000 meters by December, adding that it would issue 19,151 units in October. For the Ikeja Disco, 60,100 customers were expected to have meters and the Kano DisCo would issue 7,000 meters by month’s end. The Yola DisCo, covering Borno, Yola and Adamawa states, expects to meter 5,000 customers.