Microfinance Bank

612 Nigerian microfinance banks may close shop over recapitalisation

More than two-thirds of licensed Microfinance Banks (MFBs) in Nigeria may close shop if they fail to meet the recapitalisation deadline, the first threshold of which is due by the end of April.

READ ALSO: DMO Opens Two New 2021 FGN Savings Bonds For Subscription.

Of the 874 licensed MFBs, about 612 may be affected, although the final deadline will be in 2022. These banks were established to meet the financial needs of Nigeria’s low-income earners.

Considering the impact of the COVID-19 pandemic on economic activities, Central Bank of Nigeria (CBN), in 2020 revised the deadline for compliance with the minimum capital requirement for microfinance banks by one year.

Outcomes of an internal survey conducted by the National Association of Microfinance Banks (NAMB) show that 30 percent of MFBs will be able to meet this deadline. This means 70 percent of the banks will go out of business with severe consequences for the financial services industry.

“We are advocating through different sources to see how the CBN can shift ground by reducing the capital requirement amount or extending the tenure of the deadline,” Yusuf Gyallesu, national president, National Association of Microfinance Banks (NAMB) said in an exclusive interview with BusinessDay.

One of the NAMB’s lobby objective is a request that the CBN should extend this deadline to at least 2025 because the economy is in bad shape.

An argument the association has presented in support of this extension of the deadline is that Nigeria is just coming out of a depression and there is no money to inject into the banks. This was worsened by the COVID-19 pandemic as the whole of last year there was limited economic transaction.

“So within this COVID-19 period, where can one go to raise 1, 000 percent of the reviewed capital,” Gyallesu said.

Consequently, MFBs operating in rural unbanked and underbanked areas (Tier 2) are expected to meet the N35 million capital threshold by April 2021 and N50 million by April 2022.

MFBs operating in urban and high-density banked areas (Tier 1) are expected to meet the N100 million capital threshold by April 2021 and N200 million by April 2022;

State licenced MFBs are to increase their capital to N500 million by April 2021 and N1 billion by April 2022.

National MFBs are expected to meet minimum capital of N3.5 billion capital by April 2021 and N65 billion by April 2022.

If a microfinance bank collapses as a result of illiquidity it would rub off on the corresponding bank (commercial banks) and impact on customer deposits.

“This issue should not be seen as specific to microfinance banks, it would distort the whole financial system and by extension Nigeria as a nation will be affected by that problem,” Gyallesu said.

At the time of reporting, there are no data to ascertain the number of those MFBs that have met the first threshold of recapitalisation.

This may not be known until the expiration of the deadline, people familiar with the industry have said. Some are still struggling to meet up and some may inject funds before the deadline.

The CBN had in October 2018, reviewed upward the minimum capital requirement of the three categories of MFBs as follows – Unit microfinance banks from N20 million to N200 million, State MFBs from N100 million to N1 billion, and the National MFB from N2 billion to N5 billion.

On March 18, 2019, the CBN reviewed the minimum capital requirements for microfinance banks, allowing for instalment payment and categorisation of Unit Microfinance into two of Tier 1 and Tier 2.

In the new capital requirement guideline, tier 1 MFBs (urban) are to pay N200 million as minimum capital requirement, while tier 2 (rural) are expected to pay N50 million.

As part of efforts to meet up with the capital requirement, many of the operators are considering mergers and acquisition, downsizing, or going to the Stock Exchange to raise funds.

For instance, Baobab Microfinance Bank Nigeria currently has about N4.6 billion capital and would need an MFBsadditional N400 million to fully recapitalise to N5 billion for national licence and the bank plans to achieve that before September 2021.

On acquiring another bank, Kazeem Olanrewaju, managing director/CEO at Baobab Microfinance Bank said, “We have some prospects. We are still discussing but our plan is to fully recapitalise from our retained earnings and that is our first priority before we think of acquiring anybody.”

According to Gyallesu, in the first month that the CBN introduced the new capital requirement the first thing his association did was to put up a technical team that went round the country, in six geo-political zones. They also selected executive members, who went to the Nigerian Stock Exchange (NSE) to ask for a window for long-term funding so that MFBs can meet up with their capital.

They developed some papers, “we did stakeholders sensitisation where we told them the issues on ground and options. The first option was mergers and acquisition. Another option was to downsize or go to the stock exchange to raise money,” Gyallesu said.

NPF Microfinance Bank Plc on December 31, 2018 at its 25th annual general meeting announced plans to do a public offer with a view to raising more funds from the Nigerian Stock Exchange (NSE) to shore up its working capital.

Operators’ request

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DMO

DMO Opens Two New 2021 FGN Savings Bonds For Subscription.

The nation’s debt office, the Debt Management Office (DMO) has offered for subscription, two new Federal Government of Nigeria’s savings bonds at N1,000 per unit.

READ ALSO: CBN to limit intervention in the I&E FX window…

The bond opens today 6th April 2021 and closes on 9th April 9th, 2021 and the DMO says one of the bonds is a 2-year savings bond due on April 14, 2023, at an interest rate of 5.522 per cent per annum, while the other is a 3-year FGN Savings Bond due April 14, 2024, at 6.522 per cent per annum
Each of the saving bonds is opened at N1,000 per unit, with a minimum subscription of N5,000 in multiples of N1,000 thereafter and subject to a maximum of N50 Million.
It also disclosed that the Settlement Date is fixed on April 14, 2021, and the Coupon Payment Dates are July 14, October 14, January 14, and April 14.

“The bonds qualify as securities in which trustees can invest under the Trustee Investment Act. It is backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria,’’ DMO explained.

The DMO urged interested investors to contact the stock-broking firms appointed as distribution agents by the DMO.

The Debt Management Office (DMO) had also on March 18th 2021 listed its third Sovereign Sukuk “N162.557 Billion 7- year 11.20 percent Al Ijarah Sovereign Sukuk that is due 2027” on The Nigerian Stock Exchange and the FMDQ Securities Exchange.

The Sukuk which at the time of issuance was massively subscribed to the tune of N669.124 Billion or 446 percent, was issued to finance 44 economic road projects across the six (6)-geopolitical zones. With the listing, investors who are already holding the SUKUK can trade them while new investors have an opportunity to buy the SUKUK in the secondary market.

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CBN

CBN to limit intervention in the I&E FX window…

Emerging data about Nigeria’s Foreign exchange inflows into the Investors and Exporters (I&E) forex window indicate that the Central Bank (CBN) is keeping its word to reduce its intervention in the dynamics of the market.

READ MORE: $1.5bn for Port Harcourt refinery repair can build 12 world-class hospitals – Peterside

Inflows into the market dropped to six months low following significant decline by 99.3 percent in interventions by the Central Bank of Nigeria (CBN), which hitherto was a dominant player in the market.

Godwin Emefiele, the CBN governor, said at the last Monetary Policy Committee (MPC) meeting briefing that since January the CBN had not intervened in the I&E window.

The market has always operated within a band of around N409 to the dollar. At some point, it attained N412 and N413, and began to move, and that it is how it is supposed to move, he said. “The CBN job is to moderate the market in line with where we think exchange rate should be,” Emefiele had said.

Data from the FMDQ captured in a report by FSDH Research show that total foreign exchange inflow into the window decreased by 39.48 percent to $565.9 million in February 2021, compared to $935.2 million in September 2020.

The inflows comprised of Foreign Direct Investment (FDI), which fell to $7.5 million in February 2021 from $30.8 million in September 2020; Foreign Portfolio Investment (FPI) $17.9 million in February 2021 ($36.8m in September 2020), other corporate $9.3 million in February 2021 ($22.4m in September 2020), and the CBN $2.9 million in February 2021 ($434.5m in September 2020).

Others include inflows from exporters, which dropped to $175.7 million in February 2021 from ($206.8m in September 2020), individuals $2.5 million in February 2021 from ($29.4m in September 2020), and non-bank corporate, which declined from $350.1 million September 2020, to $175.5 million in February 2021.

Inflows from the CBN fell by 99.3 percent from $434.5 million in September 2020 to $2.9 million in February 2021.

Despite the positive GDP growth in the fourth quarter of 2020, inflows from FDI and FPI remain low in the first two months of 2021.

This suggests low investors’ confidence amid uncertainty relating to foreign exchange management and insecurity concerns, analysts at FSDH said.

Despite rising crude oil prices, Nigeria’s External Reserves have lost 5.7 percent of its value from January 25 to March 17, 2021, according to the report.

Challenged oil inflows due to OPEC’s cuts, weaker foreign investment inflows, high demand for foreign currency to finance imports and other needs and possible clearance of FX backlogs are factors that continue to weaken External Reserves.

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Atedo-Peterside-1-e1601547660528-750x430

$1.5bn for Port Harcourt refinery repair can build 12 world-class hospitals – Peterside

The founder of Stanbic IBTC and Anap Foundation, Atedo Peterside, says the $1.5 billion earmarked for rehabilitating the Port Harcourt refinery can build 12 world-class hospitals in different geographical zones across the country.

READ ALSO: Rivers courts decide on Indorama’s 7.50% host community equity dividends

“The $1.5bn earmarked for PH Refinery Rehabilitation by #NNPC could build 12 world-class hospitals costing $125m each — two in each geopolitical zone,” Peterside said in a tweet on Thursday.

He advised the Federal Government to sell the Port Harcourt refinery to qualified private sector investors who can carry out necessary repair works with their own money.

“We could then allow private sector core investors to purchase the refinery and rehabilitate it with their own funds,” Peterside said.

Several Nigerians have called on the Federal Government to privatise the refineries and avoid years of losses from them, but the management of the Nigeria National Petroleum Corporation (NNPC) has continued to insist it will rehabilitate them and continue to own them.

A report published by NNPC in 2020 shows that Nigeria’s three refineries still cost the country N10.23 billion in expenses.

The NNPC disclosed in the report that the three refineries, located in Warri, Port-Harcourt and Kaduna, processed no crude because of the rehabilitation works being carried out on them.

The Port-Harcourt Refining and Petrochemical Company Limited (PHRC) has the capacity of producing 210,000 barrels per day, Kaduna Refining and Petrochemical Company Limited (KRPC) can produce 110,000 barrels per day, while the Warri Refining Petrochemical Company Limited (WRPC) has 125,000 barrels per day production capacity.

Recall on March 17, the Federal Executive Council (FEC) approved the sum of $1.5 billion for the rehabilitation of the Port Harcourt refinery.

Timipre Sylva, minister of state for petroleum, said the rehabilitation would be done in three phases of 18, 24 and 44 months.

He added that the contract would be awarded to Tecnimont SPA, an Italian company.

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Indorama Equity

Rivers courts decide on Indorama’s 7.50% host community equity dividends

The fight by different factions in Eleme, Rivers State, to control the 7.50 percent equity owned by the host communities has moved from the street (fighting and burning of houses) to the courts in the state.

READ ALSO: It’s a crime to do business in Nigeria without NIN – Pantami

This was after the intervention of the Rivers State government a few years back.

Now, the Court of Appeal in Port Harcourt has given a landmark ruling quashing an earlier injunction that stopped Indorama from releasing dividends to Elano. This is to allow the substantive case filed against Elano to continue a natural process.

In the past three years, different courts have adjudicated on the disputes that have fallen out of the conflict.

The main party is Elano Investment Limited which secured the authorisation of the host community to pursue, acquire and manage the equity when it was about to expire years ago.

Having secured a loan of N3 billion to acquire the shares, Elano later took possession of the accumulated N14bn dividend and shared it out with the various sections of the community according to the memorandum of understanding. The arrival of such a sum seemed to spark off the fire as many of the leaders who seemed uninterested in the share when funds were being mobilised to purchase share now took a new stand against Elano, saying they had no right to manage the equity.

This led to violence, burning of houses, and attempts to mob the directors until the state government intervened to restore peace and urged aggrieved parties to seek judicial resolution.

Consequently, Elano went to court to seek judicial interpretation of the rights and the agreement they had with the host community representatives.

In April 2017, the justice, Hillary Oshomah, had granted all the prayers of the Elano board, saying he did so after studying the claims by Elano and counterclaims by the 28 other defendants.

The court said it took cognisance of the fact that Elano was given a due mandate by the communities to source funds to buy out the 7.5 percent offered to the host communities by the Federal Government through the Bureau of Private Enterprises (BPE) and to manage it.

The judge said it also recognised the agreement between Elano and the host communities which provided for sharing of dividends and use of funds for development purposes. The court granted an order of injunction restraining the defendants from interfering or obstructing Elano from acting as ‘legitimate manager’ of the 7.5 percent Indorama Eleme Petrochemicals Limited host community equity. The group went on appeal and lost.

In 2020, one aggrieved person went to a high court and got an injunction to stop the release of dividends. Elano thus went on appeal. Now, the Court of Appeal has granted the motion by Elano for a stay of execution of the orders of a Rivers State High Court presided over by Justice A. Enebeli, restraining Indorama Eleme Petrochemicals Company Limited from paying out dividends to Elano.

The Court described as strange the lower court’s decision to suo–moto (on its own) extend the exparte injunctions on November 9, 2020, without hearing the parties, whereas the same court had adjourned the same case to November 10, 2020.

NIN

It’s a crime to do business in Nigeria without NIN – Pantami

Ahead of the April 6, 2021 deadline given Nigerians to link their SIM cards to the National Identification Number (NIN), Isa Pantami, Minister of Communication and Digital Economy, has said it is a criminal offence in the country to carry out business activities without first acquiring the NIN.

READ ALSO: Edo signs N100bn MOU with 7 oilpalm investors

Pantami, who spoke at the 6th Presidential Media briefing in Abuja on Thursday, cited section 27 of the NIMC Act of 2007 to buttress his point.

“The NIMC Act clause 27 states that you need the NIN number for opening a bank account, for insurance, land transactions, voter registration, and driver’s licence. So, it is an offence to transact any business activity without first having your NIN,” he said.

This is even as indications have emerged that the Federal Government may extend the registration period as only 51 million numbers have been authenticated so far.

Pantami said his ministry had scheduled a stakeholders’ meeting for Thursday afternoon to decide on the fate of those who are yet to process their NIN.

Insider source at the National Identity Management Commission ( NIMC) disclosed that the government has no immediate plans to disband the over 1,060 centres designated to register subscribers despite the deadline, given the large number of Nigerians who are yet to acquire the NIN as at April 1, 2021.

Pantami also put the number of SIM card subscribers linked to NIN at over 150 million, adding, however, that enrolment is 51 million as at March 31, 2021.

He did not state when the suspension of new SIM registration will be lifted.

“The ban may affect our economy, but when addressing the issue of security, the economy takes a back stage. Some of the SIM registration carried out in the past compromised the system.

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FG-to-create-4-million-jobs-from-oil-Palm-production

Edo signs N100bn MOU with 7 oilpalm investors

The Edo State government on Wednesday signed a Memorandum of Understanding ( MOU) with seven oil palm investors under the Edo State Oil Palm Programme (ESOPP) investors group.

AXA Mansard Promotes SMEs in Nigeria; launches Business Insurance Plan

Some of the investors are Agroallied Resources Limited, Agripalm Limited, Saturn Farms Limited; Saro Oil Palm; Fayus Nigeria Limited and Farm Forte Agro Allied Limited.

The state governor, Godwin Obaseki while signing the agreement in Benin, said the MOU, which is valued at N100 billion, would help to increase oil palm production and rejuvenate the sector for global competitiveness.

According to him, the journey started a while ago, but today’s event marks the beginning where allottees will take over the plots allocated to them to cultivate oil palm in the state.

“This exercise today, which involves the signing of 45,000 hectares of land to about seven companies for the purpose of cultivation of oil palm will make Edo one of the largest, if not the largest oil producing state in Nigeria.

This is the first phase. And the second phase, which we hope will be concluded this year, will be about the same size of land.

“At the end of this programme, when our investors may have cultivated over 100,000 hectares, we would be providing over 200,000 jobs at a minimum. It will make the state more competitive in the oil palm production business,” Obaseki said.

Obaseki, who thanked the investors for their interests in the state, reassured that his administration would create the enabling environment for businesses to yield good returns.

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AXA

AXA Mansard Promotes SMEs in Nigeria; launches Business Insurance Plan

In line with company’s strategy of fostering the growth of Small and Medium Enterprises in the country, AXA Mansard Insurance PLC, a member of the AXA Group and global leader in insurance and asset management, wishes to announce the launch of its ‘Business Insurance Plan’.

READ ALSO: ITF to Train Seven Million on Agric, Construction, Others

The official launch of this product took place on the 25th of March 2021 at AXA Mansard’s office at Ozumba Mbadiwe Road, Victoria Island.

The Business Insurance Plan (BIP) is a one-stop insurance solution that addresses the business risk exposures of small and medium enterprises. It is a pot-pourri of highly beneficial insurance risks management solutions bundled together. These solutions include Business Content, Group Personal Accident, SME Life, Health Care, Public Liability, Optional Covers, Professional Indemnity, Comprehensive Motor, Stock and General Conditions.

Every business comes with a certain amount of risk. Although pitfalls and challenges cannot be avoided, but they can be mitigated with the proper precautions, planning, and Insurance coverage. These risks and pitfalls are what the Business Insurance Plan seeks to address.

The BIP is available for purchase seamlessly on the company’s transaction website. www.axamansard.com. Purchases can also be made through sales agents and at any of our offices nationwide.

Speaking at the event, the Chief Executive Officer of the company, Mr Kunle Ahmed stated, “Our aim is to deliver the appropriate solutions for small to medium enterprises at a competitive price. It is our expectation that this product will enable the SMEs hedge the risks they face and focus on strategizing and growing their businesses knowing that they are protected.”

With 17.4 million SMEs in Nigeria, the role they play in the growth & development cannot be overemphasized. They are a significant force in reducing unemployment and accelerating GDP growth. We are therefore very excited to be able to provide this innovative solution that ensures they continue to thrive.

The Chief Client Officer, Mrs Rashidat Adebisi stated that “the driving force behind the development of this product is AXA’s purpose which is to “Act for human progress by protecting what matters”. At AXA Mansard, we care about people and their businesses, therefore we constantly listen, think and innovate.”

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Industrial Training Fund

ITF to Train Seven Million on Agric, Construction, Others

As a way of saving the country from its rising unemployment and poverty rates, the Industrial Training Fund (ITF) has said that it is set to train over seven million Nigerians in the areas of agriculture, construction and facility maintenance, information and communication technology, manufacturing and services between 2021 and 2031.

READ ALSO: Why Nigerian tech founders are incorporating companies in the US, UK

Disclosing this in Jos during an interactive session with the journalists, the Director General of ITF, Sir Joseph Ari noted that, “skill acquisition remains the most sustainable solution to increasing poverty and unemployment, and the catalyst to economic growth and development.”

According to him, the ITF was among the few agencies requested by the federal government to forward submissions on lifting of 100 million Nigerians out of poverty in 10 years.

“If our proposal, which is currently receiving attention of the authorities, is assented to, the ITF will train over seven million Nigerians in the Agriculture, construction and facility maintenance, information and communication technology, manufacturing and services sector between 2021 and 2031.”

He said that the Fund has implemented several skills intervention programmes, including the National Industrial Skills Development Programme (NISDP), Special Skills Development Programme (SSDP), Federal Government Skills Empowerment Programme (FEGOSEP), Info-Tech Skills Empowerment Programme (ISEP), and Agric-preneurship Training Programme (ATP) with which it has trained thousands of Nigerians that were empowered with start-up packs to set up on their own.

He added, “This year, which we have declared as the year of ” skills Escalation for Prosperity”, we have commenced processes for the implementation of more skills intervention programmes namely: the National Industrial Skills Development Programme (NISDP), the Skills Training and Empowerment Programme for the Physical Challenged (STEPP-C), the Construction Skills Empowerment Programme (CONSEP), the Passion to Profession Programme ( P2PP), and the Agri- preneurship Training Programme (ATP).

He added that the programmes would train about 12,000 Nigerians between three and six months in web design and programming, advance computer networking, mobile app development, iron bending, masonry, crop production, aquaculture, air-conditioning and refrigeration, plumbing, GSM repairs and ladies wig cap making.

Ari added that, in appreciation of their efforts to equip Nigerians with requisite skills and contributions to the development of the Micro, Small, and Medium Enterprises (MSMEs) sector in Nigeria, ITF was named as a member of the steering committee of the federal government to drive the implementation of the various support schemes for MSMEs in the country as part of the national response to the COVID-19 pandemic as part of Government’s social investment programmes under Economic Sustainability Plan.

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tech companies

Why Nigerian tech founders are incorporating companies in the US, UK

Investors are once again writing big cheques for Nigerian tech companies as normalcy begins to return.

READ ALSO: Naira gains 0.21% at investors window amid low dollar supply

While the balance sheet of the company, the customer acquisition numbers, and what stage of development the company is currently at, are significant factors that help investors decide which start-up will be getting their money, there is a big catch to land big-ticket funding.

Where is the company incorporated?

Nearly 90 percent of the companies that have closed big-ticket funding in 2021 so far were incorporated either in the US or UK.

In the month of March alone, tech companies have raised more money than they did in the whole of 2020. However, the about $204 million raised so far have mostly come from companies with publicly known incorporation records outside the continent. In fact, four out of the six companies accounted for about $195 million raised so far.

It is the same for companies that have raised funding since January.

uLesson which raised the first big-money – $7.5 million – in 2021 was founded in 2019 and incorporated in the state of Delaware in the United States. Flutterwave, which has closed the most funding so far in 2021 was also incorporated in Delaware and identifies its head office as 1323 Columbus Avenue, San Francisco CA 94133 USA with company number 6031713. Cowrywise which raised $3 million from Quona is another company incorporated in Delaware. Afriex which raised $1.2 million was incorporated in California, US.

Others are Kwik Delivery, which raised $1.7 million, incorporated in Paris, France, and Kuda Bank, which raised $25 million was incorporated in London.

A local investor may not think too much of this, but a tech company incorporated in Nigeria stands little chance of convincing foreign investors they are worth their big cheques.

So why do Nigerian founders prefer to go outside the country and even continent to incorporate the entity that gives birth to their ideas? The least motivation is the difficulty involved in incorporating companies in Nigeria.

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