Story highlights

• Nigerian banking stocks have suffered a sharp decline in the second quarter, exacerbated by the Central Bank’s recapitalization directive.
• The FUGAZ stocks, comprising major Nigerian banks like FBNH, UBA, GTCO, Access Corporation, and Zenith Bank, have entered a bearish phase, with share prices significantly declining in anticipation of rights issues.
• Financial analysts have noted that the share price decline typically accompanying rights issues is due to the offer of shares at prices below market rates to entice existing shareholders, thereby increasing the supply of shares and putting downward pressure on prices.

Nigerian banking stocks have experienced a dismal second quarter thus far. This downtrend follows the Central Bank’s announcement on banking recapitalization, which has set expectations for further declines in share prices.

Investors, particularly those with substantial interests in major Nigerian banks, tell Nairametrics they are bracing for these potential drops. Early trends suggest their expectations of lower share prices is panning out as they gear up for non-dilutive rights issues.

These rights issues are typically the first step in the capital-raising process and could lead to further downward pressure on stock prices they opine.

Banking All Share Index

This trend is currently reflected in the performance of banking stocks. The Banking All Share Index, which tracks some of the most capitalized bank stocks on the Nigerian Exchange, is down 18% quarter-to-date, in stark contrast to the All-Share Index, which has seen a 6% increase over the same period.

• Year-to-date, Nigerian banking stocks have decreased by 6.8%, while the NGX All Share Index has risen by 31.37%.
• This is a significant reversal from the first quarter of the year, during which banking stocks posted a 14.6% return.
• At that time, the narrative was that bank stocks were undervalued both in terms of their earnings multiple and when evaluated in dollars.
• The momentum, however, has slowed recently, largely due to newly announced banking recapitalization plans.
• Nigeria’s Central Bank has mandated an increase in the minimum share capital, requiring international banks to hold N500 billion and nationally licensed banks N250 billion. This directive indicates that the banking sector must raise over N4 trillion (about $2.8 billion) within 18 months.

As a result, investor relations teams at banks are reportedly working overtime to meet these deadlines. But with billions of shares outstanding and freely floating, bank stocks are likely to face downward pressure in the short term as investors anticipate the rights issues.

FUGAZ stocks under pressure

The performance of tier-one bank stocks, which include FBNH, UBA, GTCO, Access Corporation, and Zenith Bank (FUGAZ), points to a bearish streak even as most adjust their prices ahead of dividend announcements.

In a recent Nairametrics report, nearly all the banks dropped below the one trillion market capitalization mark, with GTCO and Zenith barely hanging on. The valuation of FUGAZ bank shares is significantly declining in response to announcements of impending right issues.

• For example, FBNH, whose share price was quoted as high as N43 per share, is now down to N25 per share.
• One investor, who requested anonymity, suggested the stock could fall further to its year low of around N18, achieved on April 24^th, if it continues to be oversold based on their technical analysis.
• A market maker with ties to the bank suggested the bank’s planned N300 billion rights issue could be priced at N15.50 per share, pointing to the same price that was mooted when the bank first announced a right issue in 2023.
• Access Corporation, Nigeria’s largest bank by total assets, has already seen its share price fall to N17.4, just N1.4 shy of its own year low of N16 per share. Access Bank also announced plans to raise N365 billion via a rights issue.
• UBA, another tier one bank, has seen its share price drop from a year high of N33.95 to just N20.50. The board also approved a rights issue for the bank. The last time UBA raised capital via a rights issue in 2015, it did so at a share price of N3.50.
• The same trend applies to Zenith Bank and GTCO, which have also seen their share prices fall from year highs of N47.35 and N53 to N34 and N40, respectively.
• They are also shy of their year lows of N31.3 and N32.7. Both GTCO and Zenith have also announced plans for the right issue.

Although all the banks have announced plans to raise capital, the dates and share prices for the capital raises have not yet been announced

What they are saying

Speaking on the issue, the president of the Association of Capital Market Academics of Nigeria (ACMAN) highlighted that a decline in share price often coincides with a rights issue.

President of ACMAN, Professor Uche Uwaleke, said the trend is commonly observed as rights issues are usually extended to existing shareholders at prices lower than prevailing market rates, aiming to incentivize shareholders to subscribe for additional shares.

Consequently, the influx of shares into the market intensifies, particularly when shareholders choose to divest a portion of their holdings, exerting downward pressure on share prices.

“A fall in share price normally accompanies a rights issue. This is because rights issues are typically made to existing shareholders at prices below current market values to serve as incentives to the shareholders to take up additional shares. So, the supply of shares to the market is increased especially when those shareholders opt to sell part of their shares which end up depressing share prices,” he said.

The Managing Director of Arthur Steven Asset Management Limited and former President of the Chartered Institute of Stockbrokers (CIS), Olatunde Amolegbe, noted that a discernible reaction has been evident since last month following the release of the recapitalization timeline by the Central Bank of Nigeria (CBN).

He emphasized that investors consistently exhibit caution regarding dilution stemming from capital-raising endeavours, particularly those entailing equity augmentation.

Amolegbe anticipates that volatility in banking stocks is likely to persist until the completion of the Rights issues.

“We’ve started seeing that reaction since last month when the recapitalization timeline was released by the CBN. Investors are always wary of dilution that typically results from capital raising exercises especially those involving equity raise.

My expectations are that volatility in banking stocks will probably continue until the rights issues are completed”.

The Managing Director of Highcap Securities Limited, Mr. David Adonri, highlighted that the post-rights Issue price dynamics are typically influenced by the prevailing market sentiment.

In a bullish market environment, prices may experience an upward trajectory following such issuances. However, he cautioned that irrespective of market sentiment, an oversupply of stocks resulting from a new issue could lead to a decline in prices.

Adonri noted that the movement of banking stocks after an impending rights issue is subject to considerable uncertainty, owing to the volatile nature of stock market fluctuations.

Outlook for banking stocks

Despite potential headwinds for investors interested in banking stocks, these conditions still provide a unique opportunity for medium-term investments.

• Banks are perhaps uniquely positioned to achieve the highest profits in their history, bolstered by central bank policies that have enhanced their earnings from foreign exchange gains and income from risk-free government securities.
• However, risks still exist in the longer term, with capital raises likely to increase the number of outstanding shares. The more shares a bank has, the greater the pressure on it to deliver strong earnings per outstanding share.
• Banks also face potential challenges as the era of super profits, driven by current central bank forex and monetary policies, gives way to a reliance on income from riskier lending activities.

Investors also have one eye on risk-free government securities which attract interest rates as high as 20% compared to the stocks which are riskier despite being cheap.

Story highlights

• Amidst macroeconomic headwinds of heightened inflation rate, interest rates and volatile exchange rates due to Naira devaluation, cement companies have managed to sustain profitability.
• Despite sustaining profitability, unlike other sectors, particularly, the consumer goods, cement companies experienced a decline in profitability attributed to elevated foreign exchange costs and high-interest experiences.
• Consequently, this decline is reflected in the profit margin, return on equity, indicating the impact of the macroeconomic challenge.

Since 2023, the business landscape has been turbulent, characterized by macroeconomic challenges of heightened inflation, fluctuating interest rates, and volatile exchange rates.

As a result, many companies have suffered significant losses, some resulting in retained losses and the erosion of shareholders’ funds.

Nevertheless, amidst these challenges, Dangote Cement, BUA Cement, and WAPCO (Lafarge) have sustained profitability, although not without encountering some impacts.

An examination of the companies’ results reveals the varying degrees of impact caused by these headwinds.

Revenue Analysis

The combined revenue of the three companies in 2023 amounted to N3.074 trillion, reflecting a notable 31% year-on-year growth.

This positive trajectory continued into Q1 2024, witnessing an impressive surge of 85% in aggregate revenue, reaching N1.116 trillion. Notably, this Q1 figure represents 36% of the total aggregate revenue recorded in 2023.

Dangote Cement led in revenue for 2023, reporting N2.208 trillion out of the total N3.074 trillion revenue, marking a 36.4% YoY growth.

It continued its strong performance in Q1, with revenue surging by 101% YoY to N817.350 billion, representing about 73% of the three companies’ revenue in Q1. This highlights its continued market dominance.

The growth in Dangote Cement’s revenue appears to be primarily driven by pricing strategies, as the company’s sales volume experienced a decline of 1.8% to 27 million tons in 2023.

BUA Cement secured the second position in both revenue value and growth. Its revenue grew by 27% YoY in 2023, reaching N459.999 billion. The company further improved its performance in Q1 with a growth of 52%, outpacing its long-term growth trajectory.

On the other hand, WAPCO (Lafarge) experienced marginal revenue growth of 8% YoY in 2023, amounting to N405.5 billion. This trailed its 5-year compound annual growth rate of 17%, indicating a slowdown in revenue expansion momentum. However, there was a notable improvement in Q1 as revenue surged by 50% to N137.77 billion

Profitability and Margins

Despite revenue growth, there’s a noticeable decline in profitability and margins.

In 2023, aggregate pre-tax profit decreased by 2% to N699.114 billion, with a further 4% decline to N196.300 billion in Q1 2024.

This decline can be attributed to increased power costs, foreign exchange losses, and interest expenses.

Collectively, the companies reported a surge in foreign exchange losses, reaching N255.362 billion in 2023, a 246% YoY increase, and escalating to N95.624 billion in Q1 2024, marking a significant 1,133% rise.

Additionally, they incurred significant expenses on fuel and power, totaling N598.137 billion in 2023, representing a substantial 42.45% increase from the previous year.

These trends suggest that the companies are grappling with operational inefficiencies and external economic pressures. Effective cost management strategies are crucial to sustain and improve profitability in the long run.

Dangote Cement stands out as the only company that achieved profitability growth in both 2023 and Q1 2024.

Despite grappling with a substantial 204% surge in foreign exchange losses, amounting to N164.077 billion in 2023, and a subsequent 551% year-on-year increase to N63.765 billion in Q1, Dangote Cement managed to maintain profitability.

In 2023, the company saw a 6% year-on-year increase in pre-tax profit, followed by an even more impressive 13.34% growth in Q1 2024.

However, this increase in profitability was accompanied by a decline in pre-tax margin. This suggests that although the company’s earnings grew, it also faced escalating costs at a faster pace, squeezing its profit margins.

Notably, Dangote Cement’s cost of sales grew by 143%, outpacing its revenue growth of 101% in Q1. This indicates that the company is indeed experiencing rising costs at a faster rate.

BUA Cement faced a notable decline in profitability, with a 44% YoY decrease to N67.220 billion in 2023, followed by a further 39.97% decline in Q1 2024.

This decline can largely be attributed to the accelerated growth in the cost of sales, driven by escalating material input costs that outpaced revenue growth.

Additionally, the company recorded significant foreign exchange losses. In 2023, BUA Cement incurred a significant N69.956 billion in FX losses, marking a substantial 1,172% YoY increase. This trend continued into Q1 2024, with FX losses growing by 688% YoY to N10.1 billion.

These factors collectively contributed to a significant decline by 2,013 basis points in the pre-tax margin, which dropped to 13% in Q1 2024.

With a pre-tax profit margin of 13% in Q1 2024, lower than Dangote Cement’s 20%, means that BUA Cement retains a smaller portion of its revenue as profit. This also could indicate higher expenses or lower revenue relative to costs.

WAPCO (Lafarge) reported the lowest revenue among the three companies in 2023 of N405.502 billion. However, despite this, it achieved the highest growth rate of 13% YoY in pre-tax profit. Additionally, it was the only company that recorded growth in pre-tax profit margin of 4%.

Nevertheless, in Q1 2024, WAPCO encountered challenges as it faced a substantial foreign exchange loss of N21.804 billion. Consequently, this led to a significant decline of 61.26% in pre-tax profit, decreasing to N8.709 billion, and contracting the profit margin to 6.32%.

The profit and profit margin decline of these companies likely contributed to the decrease in return on equity.

In 2023, the average return on equity for the three companies fell by 23% to 19%. Dangote Cement maintained the highest return at 26.40%, albeit with a 27% year-on-year decrease, followed by BUA Cement at 18%, marking a 27% year-on-year decline, and WAPCO at 12%, down 9% from the previous year.

This decline signals challenges in operational efficiency, financial health, and investor confidence, necessitating strategic adjustments.

Despite this, the companies’ share prices have surged, indicating ongoing investor optimism. Dangote Cement leads with a year-to-date gain of 105.28%, surpassing its 2023 gain of 31.25%, followed by BUA Cement at 48% and WAPCO at 39%.

India and China lead the chart with 1.43 and 1.42 billion people, respectively, followed by the United States with 0.339 billion. Indonesia, Pakistan, and Nigeria complete the list, with populations ranging from 0.223 to 0.277 billion, showcasing global demographic diversity and distribution. 

In developmental economics, there has been a concern with population growth, which evokes much controversy and concern, as does the concept of overpopulation. Conventional wisdom often portrays overpopulation as a harbinger of underdevelopment, invoking images of strained resources, environmental degradation, and economic stagnation.

However, upon closer examination, this narrative reveals itself to be a simplistic myth rather than an accurate reflection of reality.

Q: “One of the primary flaws in the overpopulation-underdevelopment narrative lies in its failure to account for the complexities of economic dynamics and human ingenuity.”

The notion that overpopulation inevitably leads to underdevelopment is deeply ingrained in popular consciousness. It stems from the Malthusian theory proposed by Thomas Malthus in the late 18th century, which posited that population growth outstrips the capacity of resources to sustain it, resulting in poverty, famine, and societal collapse.

While Malthus’s theory gained traction during his time and continues to influence public discourse today, empirical evidence and modern economic theory challenge its validity.

One of the primary flaws in the overpopulation-underdevelopment narrative lies in its failure to account for the complexities of economic dynamics and human ingenuity. Contrary to Malthusian predictions, history has shown that increases in population can coincide with periods of economic growth and prosperity.

In the latest update on global population in 2023, World Bank data uncovered an extraordinary trend: India and China, collectively hosting over 2.8 billion individuals, account for a staggering 35.60 percent of the world’s population, which stood at over 7.95 billion. What’s even more remarkable is that these two populous nations were at the forefront of significant economic development.

This revelation challenges the conventional wisdom that population size alone dictates a nation’s level of development.

India, having surpassed China to become the world’s most populous nation with over 1.43 billion people, stands as a testament to this paradigm shift. Leveraging its vast workforce as a demographic dividend, India has propelled itself forward as an economic powerhouse in recent decades.

This data highlights a critical insight: population size is not a limiting factor in a nation’s development trajectory. Instead, it is how countries harness their human capital and resources that determines their economic prosperity.

India’s ascent to the top spot in population size serves as a compelling example of the potential for growth and innovation inherent in populous nations.

The country has become a global hub for information technology (IT) and business process outsourcing (BPO) services, employing millions of skilled workers.

India’s vast labour pool has also fueled growth in manufacturing, agriculture, healthcare, and other sectors. Moreover, the country’s growing middle class presents a significant consumer market, attracting both domestic and foreign investment.

According to World Bank data, India boasts $3.41 trillion as its gross domestic product (GDP), demonstrating how the country has been able to use its population to its advantage.

China, now the second-most populated country in the world with a population exceeding 1.4 billion, has utilised its workforce to become the world’s manufacturing powerhouse.

The biggest economy out of Asia not only has a large population, it doubles as the second strongest economy after the US with $17.9 trillion as its GDP.

The country’s labour-intensive industries have propelled its economic growth, with sectors like electronics, textiles, and machinery driving exports and foreign investment. Additionally, China’s large domestic market has fueled consumer spending, contributing to its economic expansion.

Moreover, China’s emphasis on education and skill development has resulted in a highly skilled workforce, further boosting its competitiveness on the global stage.

The United States has proven itself to be the dominant economy in the world, having a GDP over five times bigger than India’s.

The US boasts a whopping $25.4 trillion as the country’s economic output, according to the World Bank.

With a population of over 330 million people, the US has harnessed its diverse and skilled workforce to drive innovation and economic growth.

The country’s emphasis on research and development (R&D) has led to breakthroughs in technology, healthcare, and other sectors, driving productivity and competitiveness.

Moreover, the entrepreneurial spirit in the US has resulted in the creation of numerous startups and large corporations, further stimulating economic activity.

Additionally, immigration has played a crucial role in supplying talent and labour, contributing to the country’s economic dynamism.

However, of the top ten most populous nations, Nigeria, Pakistan, and Bangladesh have a relatively lower national income, affirming the need for these countries to focus on wealth creation through improved productivity and value creation.

Nigeria, now the fourth-largest economy in Africa, according to the International Monetary Fund, has about 218 million people as its population. But the country’s economic output pales, with a staggering $472.6 billion.

The country has recently witnessed an upheaval in its economy, from low foreign direct investment to a decrease in oil remittances and various reforms by the government in power that have seen the former largest economy contend with skyrocketing prices, exchange rate fluctuations, and spiralling inflation.

Analysts who spoke to BusinessDay hold that Nigeria has failed to invest in human capital, which serves as the major drive for development and economic stability.

“No country develops with a perpetually low human capital. If you don’t invest in your citizens through quality education and access to technology, there won’t be productivity,” a leading economist and university lecturer said.

“China and the US have constantly been at the top because they understand the importance of strengthening their workforce by investing in them. If they had left their people with no skills to spur growth, they would have remained like us (Nigeria),” Michael Anagun, a lecturer of economics, said.

Pakistan is the fifth-most populous country in the world, followed by Nigeria. It has about 235 million people living in its territory. But the country has equally been faced with a series of challenges, thereby hurting the growth of the country’s economy.

The country is plagued with deep-rooted structural challenges, including weak institutions, political instability, and inadequate infrastructure. These issues have hindered the country’s ability to attract investment and foster sustainable growth. No wonder it’s a staggering $374.7 billion in GDP.

Beyond weak institutions, the country is faced with persistent macroeconomic imbalances, such as high fiscal deficits, inflation, and external debt, which have put strain on the economy. Weak fiscal management and a reliance on borrowing to finance expenditures have exacerbated these imbalances.

There have also been issues of security concern, including terrorism and regional instability, which have adversely affected investor confidence and economic activity. These challenges have deterred both domestic and foreign investment, particularly in sectors like tourism and manufacturing.

“Pakistan’s economy has been growing slowly over the past two decades. Annual per capita growth has averaged only 2 percent,” the World Bank said.

Moreover, the belief that overpopulation strains resources overlooks the role of technological innovation and resource management in addressing scarcity. Throughout history, humanity has continually found ways to increase agricultural productivity, harness renewable energy sources, and develop more efficient technologies to meet growing demand.

The Green Revolution of the mid-20th century, for example, saw the adoption of high-yield crop varieties and modern agricultural techniques that dramatically increased food production, debunking predictions of widespread famine due to overpopulation.

Furthermore, the relationship between population growth and economic development is not linear but rather shaped by a multitude of factors, including governance, education, healthcare, and institutional quality.

Countries with effective governance structures, robust education systems, and accessible healthcare tend to experience demographic transitions where declining fertility rates accompany improvements in living standards, as seen in the likes of India, China, the United States, and even Indonesia. This phenomenon, observed in many developed nations, illustrates that sustainable population growth is achievable within the framework of socioeconomic development.

Critics of the overpopulation narrative also point out its tendency to scapegoat vulnerable populations, particularly in the Global South, while ignoring underlying structural issues such as the unequal distribution of resources and economic exploitation.

Blaming overpopulation for underdevelopment absolves governments and institutions of responsibility for addressing systemic inequalities and promoting inclusive growth strategies.

In light of these insights, it becomes clear that overpopulation alone is not a determining factor in economic development or underdevelopment. Instead, it is the interaction of population dynamics with social, economic, and environmental factors that shapes the trajectory of nations.

By dispelling the myth of overpopulation as a driver of underdevelopment, we can foster more nuanced discussions and policies that address the root causes of poverty and inequality while promoting sustainable development for all.

Thus, the belief that overpopulation inevitably leads to underdevelopment is a simplistic myth that fails to account for the complexities of economic and social dynamics. While population growth presents challenges, it also offers opportunities for innovation, entrepreneurship, and human progress.

By reframing the discourse on overpopulation and development, we can move towards more inclusive and effective approaches to addressing global challenges and building a prosperous future for generations to come.

President Bola Tinubu has congratulated the President-Elect of the Republic of Chad, Mahamat Déby, on his election victory.

Ajuri Ngelale, Special Adviser to the President on Media and Publicity, in a statement, said the successful conduct of elections in Chad underlined the commitment of the government and the people to democracy and orderly transitions in the region.

He said, “The president assures President-elect Déby that Nigeria will continue to work closely with the Republic of Chad, as both countries seek to enhance peace, security, and shared prosperity for the mutual benefit of their peoples.

“The president also calls for sustained, friendly cooperation between both nations, while wishing the President-Elect success as he undertakes this noble service to the people of Chad.”

[DailyTrust]

The political crisis rocking Rivers State deepened last week, with shots fired from each side of the divide.

Leadership of the All Progressives Congress, APC, in the state had asked the state lawmakers to begin the process of impeaching Governor Siminalayi Fubara.

Fubara’s estranged godfather and FCT Minister, Nyesom Wike, on his part, described the choice of his successor as a mistake.

Wike, who spoke at an event in Rivers, begged God and his political family to forgive him.

According to him: “I want to say this clearly: in life, we make mistakes. I have made a mistake. I own it up and I say God forgive me. I have said all of you forgive me. But we will correct it at the appropriate time.

“I am human. I am bound to make mistakes. So forgive me for making a wrong judgment. So nobody should kill.”

Wike also urged his supporters in the state assembly not to succumb to intimidation, saying: “Don’t be afraid. Nobody will remove you as lawmakers.

“Most of you don’t understand. This is our work. Our business is to make them to fear. That is what I am doing. We will make them to be angry every day and they will continue to make mistakes.”

Mr Edison Ehie, the Chief of Staff to the governor did not waste time to respond, as he used the opportunity of another event in the state to vow that Fubare would teach his opponents a political lesson.

He attributed the crisis in the state to the struggle for resource control.

According to Ehie: “We are going to teach them a lesson of political arithmetic. What that small boy (Fubara) will do to you, you’ll know that khaki no be leather.

“The problem we have in the state is that 11 persons said they would control the resources of Rivers State. These 11 persons now called 20 others to allocate resources to themselves.”

However, recent happenings show that the factional state lawmakers are living up to Wike’s directive.

DAILY POST recalls that the now suspended House had earlier overruled the governor when it passed into law several bills, which Fubara’s camp believes were aimed at weakening the governor’s control of the state.

But in what appeared to be a fight-back, a Rivers State High Court barred the pro-Wike speaker and 24 other lawmakers from parading themselves as members of the House of Assembly.

Meanwhile, Fubara earlier on Friday ordered an immediate relocation of the legislative business of the state House of Assembly to Government House in Port Harcourt, where the Oko-Jumbo and the other two lawmakers are expected to carry out legislative functions.

The relocation order was contained in the state’s official Gazette, Executive Order of the Rivers State Government 001-2023.

The order came about 24 hours after Victor Oko-Jumbo, a lawmaker loyal to the governor, emerged as a new factional speaker of the assembly.

DAILY POST recalls that the governor on Monday, April 6, declared that members of the state assembly, as currently led by the Speaker, Rt. Hon. Martins Amaewhule, were no longer lawmakers, saying they do not even exist.

Fubara noted that in seeking peaceful resolution to the political crisis that erupted in the state last year, he had attended several reconciliation meetings, whose resolutions the other party, where the state’s lawmakers belong, had rebuffed.

The comment, which marked the beginning of the current face-off, was not unconnected to the inability of the assembly to approve some requests from the governor.

This is even as the lawmakers also accused the governor of deliberately withholding his assent from bills already passed, terminating the peace deal brokered by President Bola Tinubu on December 18, 2023.

DAILY POST recalls in a bid to quell the lingering political crisis in the state, Fubara and Wike alongside other stakeholders including the Rivers Peoples Democratic Party, PDP, chairperson, Aaron Chukwuemeka, and the Speaker of the state assembly, Martin Amaewhule, in December last year, signed a resolution document after a meeting with Tinubu.

However, keen watchers of the activities in Rivers say whatever is contained in the resolution now belongs to the dustbin of history as both factions have returned to trenches.

What triggered the recent crisis

DAILY POST gathered that the recent feud followed the enactment of the Rivers State Local Government (Amendment) Bill and the refusal of the governor to assent same.

On March 13, 2024, the House passed the bill and forwarded it to Governor Fubara for assent, but he declined.

Overriding the governor, the House led by its Speaker, Hon Martin Amaewhule, at its 159th Legislative sitting held at the Assembly Quarters in Port Harcourt on Monday, passed the bill into law.

The lawmakers wanted the tenure of the Local Government chairmen extended.

The chairmen are all loyal to former governor and FCT Minister, Nyesom Wike.

DAILY POST reports that the Chairmen in the 23 local government areas of the state are expected to bow out of office on June 17, 2024 as their tenure elapses.

A source privy to the happenings told DAILY POST that the House members, particularly the 27 lawmakers loyal to the FCT Minister, by the amended law, wants the office of the Chairmen extended at least by six months.

The source, who does not want to be mentioned, however, alleged that the governor withheld his assent because he was nursing the plan to appoint caretaker chairmen who will be loyal to him.

“His plan is to ensure that everyone in the government who is loyal to Chief Wike is pushed out. We all know that the current chairmen are not with him, in fact, they also want the governor impeached.

“From the look of things, Fubara does not want to conduct elections to replace the outgoing chairmen. He wants to install his own people first before conducting the election. This is what is happening in the state.

“All these battles against the House of Assembly are because of the LG chairmen. If you could remember, when the governor wanted to pass the budget last year, he installed a factional speaker to make it possible.

“Now, he has installed another Speaker who will allow him to appoint his boys to serve as caretaker chairmen in all the local government areas”, he alleged.

The source further alleged that the lawmakers have vowed that any attempt by the governor to appoint caretaker chairmen would lead to his immediate impeachment.

Meanwhile, PDP and APC have been trading words over the call for the impeachment of Governor Fubara.

While the APC alleged that the governor no longer respects separation of powers, accusing him of abusing his office, the PDP insisted that the seat of the 27 lawmakers plotting Fubara’s impeachment does not exist owing to their defection.

Why Governor Fubara must be impeached – APC

The spokesman of the Rivers State chapter of APC, Ikenga Chibike told DAILY POST on Saturday that the impeachment call became necessary to restore normalcy in the state, alleging that the governor had taken the law into his own hands by hijacking the state assembly.

Explaining what necessitated the impeachment call, Chibike said, “we called for his impeachment because the governor has become dictatorial.

“He has no respect for due processes and he has been attacking the House of Assembly and even the LG chairmen.

“The governor has taken the law into his own hands by trying to intimidate the state assembly and all other persons who failed to agree with his opinion on issues.

“Nigerians can recall that the president intervened in the disagreement between the executives headed by the governor and the House of Assembly headed by Martins Chike Amaewhule. The special intervention came with a proclamation of about eight items.

“In the document, the lawmakers were asked to withdraw their impeachment notice, which the assembly has graciously done.

“The governor was also asked to present the budget before the properly constituted assembly headed by Hon Martins but the governor refused.

“The governor had planned to hijack the responsibility of the assembly. All the bills that were passed, the governor decided to withhold his assent.

“The assembly decided to override him and he took offense and decided to intimidate the assembly by declaring that 27 members do not exist.

“So we called for the impeachment of the governor so that we can have a responsible person who can take care of the state.”

Asked why the APC was concerned over the crisis in the state citing the fact that the two major actors, Wike and Fubara are both members of the PDP, he said, “the 27 lawmakers are members of our party, so we must stand and defend their interests.

“Secondly, because Fubara is the governor of Rivers State doesn’t mean he should govern only PDP members. He is the governor of Rivers State and that includes those in his party, those in the opposition party and those who are non-partisan.

“We are interested because the crisis affects our people and it affects the development of our state.”

On the alleged move by the governor to appoint caretaker chairmen for the 2023 local government areas, the APC spokesman said, “I will not be surprised if the impunity continues. I won’t be surprised because the governor has again proclaimed another faction of the state assembly.

“These are the signs of impunity and I won’t be surprised if the governor continues on that line.

“It was on the basis of the fact that the tenure of the current chairmen will elapse on the 17th of June that the assembly asked the executive to conduct elections so that we can have democratically elected chairmen.

“The assembly gave the Chairmen six months extension to enable the governor conduct the election.

“If the election had been conducted before the expiration of their tenure, there wouldn’t be any need for extension.”

Lawmakers with legibility issues can’t impeach Gov Fubara – PDP counters APC

In a counter reaction, the spokesman of the PDP in Rivers State, Sydney Gbara told DAILY POST that the 27 lawmakers loyal to the FCT Minister lacked the power to impeach the governor.

According to him, “the truth is that the impeachment is not possible.

“In the first place, the 27 lawmakers have eligibility issues because they defected from the PDP to APC when there was no crisis in the party.

“Ordinarily, they are not supposed to be acting except for the presidential intervention which the governor signed and accepted to recognize the Martins’ faction.

“You know at that time, we had two factions. We had the Martins’ faction and the Edison Ehie’s faction which was recognized by a court of competent jurisdiction.

“Edison would have gone ahead to function as the Speaker that is recognized by law which has not had a contrary judgement up till today.

“Because of the governor’s stance for peace, he told Edison to resign to give way to the other faction to operate.

“So they have only been operating by the lifeline given by the governor of Rivers State, His Excellency Siminalayi Fubara but they abused the privilege. Day in, day out, they continue to push out one retrogressive law or the other against the state.

“They have been causing legislative nuisance in the Rivers State politics.

“They are only for their selfish interest and that of their pay master. The governor has pronounced them non existing and the pronouncement stands.

“Today, we have a new Speaker, Hon. Victor Oko Jumbo. He has been sworn in to continue from where Edison stopped. The new assembly is the legally recognized 10th assembly in the state.

“This is why I said the impeachment cannot work. They are illegally occupying the seats. They were there on the lifeline of the governor and since the governor has withdrawn that, they cannot function.

“The Rivers Youths have vowed that they will besiege wherever they seat to pronounce any impeachment against the Governor.”

On the allegation that the new Speaker emerged to enable the governor to appoint caretaker chairmen in the 23 local government areas, the PDP spokesman said, the new faction emerged because “Martins’ faction had laid siege on the governor and the people of the state. Nothing is working.

“The government is moving in a mechanical and arithmetic progression when they are supposed to be acting in geometric progression.

“House of Assembly in other states are making laws for the development of their various states. With or without them, the government has to move on.

“That is why we now have a government recognized assembly that will work with the government for the betterment of the state.”

Meanwhile, President Bola Tinubu has told the political actors in Rivers that he would not take sides in the ongoing crisis.

Tinubu, who spoke through his Special Adviser on Media and Publicity, Ajuri Ngelale, said that anyone with the belief that President Tinubu would take their side in the political crisis would be disappointed.

The Special Adviser made the President’s position known during an interview on TVC, insisting that Tinubu won’t allow any attempt to frustrate the Rivers government.

“I believe that anyone who believes that by their actions, whether it’s from the Federal level, State level or the legislative branch in the State or the executive branch in the state, if they are banking on Mr. President to take sides on this matter, they’re mistaking and they’ll be disappointed,” he said.

[DailyPost]

• Global fund lauds Nigeria’s anti-money laundering initiatives

The International Monetary Fund (IMF) has explained why the Central Bank of Nigeria (CBN) should issue operating licences or register cryptocurrency dealers.

In its 2024 Staff Report released at the weekend, the IMF recommends that global crypto trading platforms be registered or licensed in Nigeria, like similar operators, the Bureaux De Change (BDCs), which are licensed by the CBN to carry out forex transactions at the retail end of the market.

The IMF advised that such crypto trading platforms should be subjected to the same regulatory requirements applicable to financial intermediaries, following the principle of same activity, same risk, and same regulation.

The CBN had announced that cryptocurrency traders used peer-to-peer trading to manipulate the naira exchange rate against the dollar and other global currencies. 

The apex bank asserted in February that Binance, the largest cryptocurrency exchange by trading volume, had processed $26 billion in untraceable transactions in its Nigeria unit alone. 

Binance serves 185 million users in over 180 countries worldwide. 

To protect the naira from value erosion and reverse the negative impact in the financial system, the CBN subsequently stopped banks and other financial institutions from banking cryptocurrency traders.

Aside several other factors causing naira’s slide, like rising import bills, medical tourism, and tuition fees payment abroad, exchange rate manipulation by cryptocurrency traders remains a major contributory factor.

IMF said: “Rapid growth of transactions on FX trading platforms poses new challenges. At the end of February, the authorities closed the operations of Binance and other crypto-asset trading platforms that were being used by Nigerians to facilitate capital flight – neither the identity of traders nor the origin of their funds could be traced.”

“The authorities also revoked the licences of 4,173 Bureaux De Change (BDCs) that failed to comply with CBN accounting and reporting requirements. Staff recommends that global crypto trading platforms be registered or licensed in Nigeria and subjected to the same regulatory requirements applicable to financial intermediaries following the principle of same activity, same risk, and same regulation.”

The IMF lauded Nigeria’s progress in the fight against money laundering and terrorism financing.

It said: “Nigeria has made welcomed progress on improving its Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) framework, but further action is needed in line with Financial Action Task Force (FATF) recommendations. Nigeria has undertaken a series of measures, including legislative reform, conducted a money laundering and terrorism financing risk assessment, built awareness for competent authorities and the private sector, and increased investigation and prosecution of money laundering to correct identified deficiencies in the AML/CFT framework.”

[TheNation]

Directors and key management personnel of Deposit Money Banks borrowed about N549bn from their financial institutions in five years.

This is according to The PUNCH analysis of the banks’ annual reports filed with the Nigerian Exchange Limited between  2019 and 2023.

However, the banks’ loans and advances to some directors and key management personnel as well as related party transactions dropped significantly in 2023.

These transactions dropped to N52.40bn for eight financial institutions compared to N111.31bn in 2022, indicating a 52.92 per cent decline in one year.

Financial institutions reviewed in the 2023 review include Access Holdings, Guaranty Trust Holding Company Plc, Zenith Bank Plc, United Bank for Africa, Fidelity Bank, Wema Bank, Stanbic IBTC Holding Plc and the FCMB Group.

This decline came amid the release of new corporate governance guidelines by the Central Bank of Nigeria which went into effect August 1, 2023.

In the circular dated July 13, 2023, and signed by Director, Financial Policy and Regulation Department, Chibuzo Efobi, the guidelines which imposed responsibilities on the bank board and the executive compliance officers, supersede other previous codes, circulars and related directives, according to the apex bank.

The CBN guidelines on related party transactions said, “Banks shall establish a policy concerning insider trading and related party transactions by directors, senior executives, and employees, as well as publish the policy or a summary of that policy on their website. 22.2 The policy shall contain appropriate standards and procedures to ensure it is effectively implemented. 22.3 In addition to the requirements in Section 22.2, there shall be an internal review mechanism carried out by the internal audit function of the bank, to assess the compliance and effectiveness of the policy.

“22.4 Any director whose facility or that of his/her related interests remains nonperforming in any financial institution for more than one year shall cease to be on the board of the bank and shall be blacklisted from sitting on the board of such bank and that of any other financial institution under the purview of the CBN. 22.5 No director-related loans and/or interest thereon shall be written off without the CBN’s prior approval.”

Leading the pack in terms of major decline in loans to related parties and entities controlled by key management personnel was Fidelity Bank Plc, which went from N92.31bn at the end of December 2022 to N2.09bn at the end of last year.

In footnotes, the bank however said that some of the related parties like A-Z Petroleum Limited, Dangote Group and Genesis Group as of 31 December 2022, had “exited the related party relationship post 2022 financial year in line with CBN requirement.”

In 2022, the total value of insider loans for 10 banks including Access Holdings, Guaranty Trust Holding Company Plc, Zenith Bank Plc, United Bank for Africa, Fidelity Bank, Wema Bank, Stanbic IBTC Holding Plc, FCMB Group, Unity Bank and Sterling Bank amounted to N131.04bn.

Fidelity Bank led the highest for the year, followed by Unity Bank at N17.32bn and UBA at N13.74bn.

In 2021, the loans to related parties of these financial institutions rose to N139.16bn with Fidelity Bank and UBA leading at N97.73bn and N15.28bn, respectively. GTCO trailed in third position with N6.859bn.

Between 2019 and 2020, a total of N226.6bn was disbursed as loans. In 2019, eleven banks borrowed its key management personnel a total sum of N29.65bn. The figure also includes loans to companies related to the directors.

An analysis showed that GTCO lent N155m, Zenith Bank  (N1.76bn), UBA borrowed its directors N297m, Wema Bank (N5.2bn), Stanbic IBTC (N95m), FCMB (N4.8bn), Unity Bank(N7.14bn), Sterling Bank (N10.12bn) to related parties.

In 2020, the figure increased by 564 per cent or N167.32bn to N196.97bn.

Checks showed that Access Bank lent the highest with a total of N174bn to its directors and companies related to them. This was followed by Unity Bank with N7.55bn. Third on the list was Sterling Bank with N6.01bn.

Other banks including Fidelity borrowed its directors N986.2m, GTBank (N67.9m), Zenith Bank (N1.797bn), UBA (N206m), Wema Bank (N2.82bn), Stanbic IBTC (N332m), FCMB (N3.2bn), Unity Bank (N7.55bn), Sterling Bank (N6.01bn).

Commenting on the trend, the Chief Research Officer at InvestData Consulting, Ambrose  Omordion said “In my language, they say, it is the yam that you know that you use to make pounded yam. If an organisation feels that the insider or director can pay the loans given to them, then there is no issue. It is when they do not pay that is where there would be issues.

“Like what is happening now in the economy, banks are not giving loans to ordinary companies unless those with names because of economic headwinds. If they give loans to the public and they are unable to repay, Non-Performing Loans will rise. If the banks offer to insiders that would pay, it is better for them.”

Adding a word of caution, Omordion said, that when done in excess and without due process, then it is bad.

“It is when it is done in excess that it is wrong. Even banks know how to safeguard depositors’ money, which is the most important thing.

“Now, that it (insider loans) is reducing, that’s a good thing for the industry and it is a good thing for regulators too.”

The Head, Financial Institutions Ratings – Agusto&Co, Ayokunle Olubunmi, pointed out that there was no correlation between insider loans and an increase in banks’ NPLs.

“Although it is not a crime to give a loan to someone within the organisation, there is a rule and it may not be at what we call arms length. Having said that, there is no correlation that when you give an insider a loan, it goes bad.  There are some banks with insider loans which have been fully paid. However, the risk is there that they may not have done full diligence. Some banks are more stringent when it comes to insider-related loans.

“Majorly because of the CBN corporate governance, you must disclose the amount, the collateral, and the account’s performance. This is why you will see it in the accounts of banks, so that any analysts, investor will see it and if it is non-performing, then it is a red flag.”

A financial analyst and Chief Responsibility Officer, Peculiar Innovative Consulting, Segun Aremu, lamented the prevalence of the trend in the Nigerian banking sector saying, “Insider loans are prevalent in our Nigerian banking system. It has been happening for a long time. These insider loans display a lack of corporate governance which discourages investors.”

“This situation also leaves banks prone to high NPLs and what I call low profit to the banks. Meanwhile, the banks should improve their financial intermediation role and give loans to the people who need it, the manufacturers and employers of labour to drive the economy,” he said.

From the minority investor community, the overall stance was that if the loans were performing and disclosed, then there were no causes for concern.

Chairman, Ibadan Zone Shareholders Association, Eric Akinduro, speaking with The PUNCH, said, “The point is that, if it is performing, we are okay with it. As long as it is performing and there is disclosure, there is no problem but when these factors are not present, that is where we have issues.

“When a loan is not performing, it will lead to a higher rate of non-performing loans. At the end of the day, it is not just about the shareholders alone. When a loan is not performing, it is to the detriment of that business. And it is of concern to shareholders. Non-performing loans can run the business down.”

The National Coordinator of the Pragmatic Shareholders Association of Nigeria, Bisi Bakare, said, “If they are getting the loans and the loan is performing, that means there won’t be growth in Non-Performing Loans.

She, however, called on the regulators to ensure that insider loans are not written off.

“The regulators need to take the bull by the horns and ensure that these NPLs are not written off,” she charged.

Nigeria’s quest for diversified foreign exchange earnings away from oil not feasible for now as revenue from the manufacturing export sector plunged 166 per cent to N778.4 billion from the N2.1 trillion height reached in 2019.

Operators in the sector blamed poor state of infrastructure, logistics and other binding constraints which they said have worsened the operating environment in recent years.

The trend since 2019 has been downwards recording significant decline to N960.7billion attributed to COVID-19 in 2020, while a minor recovery was recorded in 2021 at N1.15trillion. But in 2022 a huge drop to N781.1billion was recorded and another significant drop to N778.4 billion was recorded in 2023.

Within the same period, the share of manufacturing exports to non-oil exports also dropped to 24.8 per cent in 2023 from 82.4 per cent in 2019.  

In its Africa Pulse publication, the World Bank specifically blamed the country’s dwindling foreign trade on poor infrastructure and inefficient logistics, among other factors.

According to the World Bank, the cost of trade in Nigeria and Ethiopia is four to five times higher than what obtains in the United States due to insecurity, higher transportation costs, topography and poor road infrastructure. 

“Studies from the Africa region consistently find spatial differences in prices of imported goods (food and non-food) as well as non-traded agricultural staples, indicating that markets are not well-integrated, and retail prices of products are affected by distance.  

“For instance, trade costs are four to five times higher in Ethiopia and Nigeria than in the United States, due to poor road infrastructure, low competition in the transportation sector, and topography,” it stated.

The report further noted that the consequences of these distortions include preference of African producers to sell locally rather than export.

In a similar vein, statistics provided by the World Trade Organisation (WTO) revealed that South African manufacturing export value was $46 billion in 2022, which is 15 times higher than that of Nigeria which was $3 billion in the same year.  

Manufacturers and operators in the export ecosystem have lamented that the harsh business environment in the country is making local products uncompetitive globally.

They noted that many businesses that are into exports have gone into extinction, even as several multinationals have also exited Nigeria over the past few years.

MAN, exporters seek govt intervention  

Giving insights into what is happening in the sector, Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said: “The rising cost of doing business has worsened competitiveness of Nigerian products in the global market, which is evident in the drastic reduction in global demand for these products.

“The reduction in global demand for Nigerian products was further buttressed by the NBS report that confirmed that the manufacturing export value of Nigeria plummeted by 166% from 2019 to 2023.  

“In addition, the exorbitant lending rate of over 30 percent has contributed largely to a drop in the share of manufacturing exports to non-oil exports from 82.4 percent to 24.8 percent in 2019 and 2023 respectively.”

Speaking to the development, Chairperson of the Export Group of MAN (MANEG), Odiri Erewa-Meggison, stated: “Indeed, it’s concerning to see exporters not doing as well as they could.

“As you must appreciate, the cost of doing business in Nigeria has increased by more than 300 percent. Just take a cue from the recently increased electricity tariffs.

“How can exporters compete on a global scale without a deliberate intervention from the government? All hands need to be on deck.  

“Exporters need deliberate interventions such as access to loans at right rates, support with eliminating administrative bottlenecks and multiple regulatory checks by different regulators. A consolidated or harmonized regulatory approach would be preferred.

“Higher costs in electricity make it more difficult to produce. Biggest elephant in the room is the incentives which need reviewing and streamlining to ensure qualifying exporters take benefit without having to compromise by settling anyone to get their incentive like Export Expansion Grant (EEG).

“There is an urgent need for a stakeholders’ engagement between government and exporters to discuss and agree on a way forward.  

“If exporters are to commit to repatriating their full export proceeds back to Nigeria, there are certain things exporters will like the government to equally commit to. For example, there is a need to review the items on the exports proceeds list in the CBN foreign exchange manual to ascertain and ensure the list is still relevant and updated to suit current needs.”

Also reacting, Chairperson of the Export Group of Lagos Chamber of Commerce and Industry (LCCI), Mrs. Bosun Solarin, said: “In 2020, the then Vice President through the office of the Presidential Enabling Business Environment Council (PEBEC) tried to help small businesses by slicing the cost of production, like NAFDAC registration. “So from 2020, many small businesses emerged into production, and some of them have entered the export market.    

“Many of such businesses have gone into extinction because of various policies that are anti-business.

“When people have even found a way to come into business through export, they are confronted with so many bottlenecks, bad policies and insecurity.

“If we don’t pay attention to security so that people can go back to the farm, if we don’t pay attention to interest rate so that the productive sector can get money to do business, if we don’t pay attention to logistics so that people can even move their products with ease, then we have not started.

“Nigeria is signing off for the guided trade of African Continental Free Trade Area (AfCFTA) very soon, and logistics is a problem to even move things.

“These, I think are places where the government should pay attention.”

Exporters must adhere to trade norms – NEPC

Meanwhile, the Nigerian Export Promotion Council (NEPC) has charged Nigerian exporters to adhere to the requirements for exporting products to different countries.

Speaking at a recent sensitisation workshop aimed at enhancing Nigeria’s export potential and strengthening trade relations with China, Mrs Nonye Ayeni, Executive Director of NEPC, emphasised the need for exporters to adhere to the General Administration of Chinese Customs (GACC).

Ayeni, who was represented by Mr Samson Idowu, North-Central Coordinator of the council, said that GACC has clear but stringent requirements for exporting products to China.

“Understanding the registration process, documentation and regulatory changes is paramount for successful export. Understanding the requirements set forth by GACC is crucial for Nigerian exporters to ensure smooth and successful trade with China,” she stated.

National Single Window will bring relief – CPPE

In his comment, CEO, Centre for the Promotion of Private enterprise (CPPE), Dr Muda Yusuf, said the implementation of the National Single Window (NSW) initiative will go a long way in enhancing Nigeria’s foreign trade.

Yusuf stated: “When you have a process that is highly bureaucratic, it gives people the opportunity for physical interaction that also gives room for discretion, which is a fertile ground for corruption, extortions, delays and inefficiencies which are also affecting the cost of goods and services.

“The impact on business will be significant. No matter what sector you talk about, what happens in the import/export sector impacts the sector, directly or indirectly. 

Whether you are in manufacturing, mining, or whatever, as long as you import or export goods. And if you talk to those who clear these goods, they will tell you the kind of experience they go through.

“So, first, there will be an impact in terms of the efficiency because when you bring technology into a space, the value proposition is the efficiency that it brings. And efficiency reduces cost of operation, it reduces the time it takes to conduct the business”.

Nigeria loses $4bn to import-export infractions annually – Tinubu

At the recent launching of the NSW project in Abuja, President Bola Tinubu stated that Nigeria currently loses about $4 billion annually to import-export infractions due to bureaucratic bottlenecks, especially at the ports.  

According to the president, the NSW project is expected to ensure 24-hour clearance of goods at the ports and simplify trade by providing a digital platform for all import and export-related activities.

Tinubu said: “This initiative will link our ports, government agencies, and key stakeholders, creating a seamless and efficient system that will facilitate trade like never before. It will reduce the need to deal with multiple agencies in multiple locations to obtain the necessary papers, permits and clearances to complete their import or export processes”.

[Vanguard]