PAPER REVIEW

BANKING & FINANCE

REPS OKAY ISLAMIC BANKING, CASH LIMIT

The House of Representatives has endorsed the Islamic banking and N150, 000 cash withdrawal limit introduced by the Central Bank of Nigeria (CBN). The endorsement came after an intensive briefing provided by the CBN Governor, Sanusi Lamido Sanusi on the two initiatives on the floor of the House yesterday. The briefing, which was applauded severally by members, brought out the benefits of the non-interest banking and the N150, 000 cash withdrawal limit. Lawmakers occasionally burst into thunderous applause as the CBN boss explained the motives behind the initiatives, especially when he challenged opinion and political leaders to lead by example and appreciate initiatives that would take the country from the doldrums. Sanusi told the House that the first memo for approval of licenses for Islamic banking was received and approved by the CBN during the tenure of his predecessor, Prof. Charles Soludo. The apex bank boss insisted that if Nigeria must meet up with other countries in terms of development, her citizens must learn to put things right in line with international standards. Sanusi declared that profit sharing without interest banking was not restricted to Islam and Muslims alone. According to him, the first memo for approval for licences for Islamic banking was received and approved by the CBN during the tenure of Soludo in 2008.His words: “The fact is that some people approached the CBN and said based on the Banking and Other Financial Institutions and Allied Matters (BOFIA) Act, which made provision for non-interest banking, they wanted a licence to operate Islamic banking. And we issued guidelines. Soludo played more roles in formulating guidelines for the establishment of Islamic banking. I am only completing the job.” He said the guidelines issued by the CBN for the operation of Islamic banking stipulated that no form of discrimination would be allowed in terms of employment, structure and transaction. The briefing which was characterised by occasional applause for the CBN boss, also revealed that Islamic banking, like every other non-interest banking, entailed ethical and socially responsible investment, unambiguous terms, non-faith-based products and services and the prohibition of unlawful businesses. On the N150,000 cash withdrawal limit, Sanusi said it was meant to generate funds to offset cash management, adding that by 2012, direct cost of cash in the Nigerian banking industry is estimated at N192 billion. According to him, the circular never prevented any individual from withdrawing cash above N150,000 but whatever amount one withdraws in excess of N150,0000, there will be a charge. Guardian

AMCON, ACCESS BANK TO INJECT FRESH N600BN INTO INTERCONTINENTAL BANK

As the September 30 deadline given by the Central Bank of Nigeria to the rescued banks to fully recapitalise approaches, the Group Managing Director, Intercontinental Bank Plc, Mr. Mahmoud Alabi, has said that the bank will receive fresh N600bn in the next few weeks. The amount, according to him, will be provided by the Asset Management Corporation of Nigeria and Access Bank Plc. Alabi disclosed this on Thursday during the bank’s “I save I win” promo and customer forum in Abuja. He said that already, a memorandum of understanding between the bank and the fund providers had been signed. The fresh funds, he noted, became imperative because the huge loss of N677bn recorded by the bank in the peak of the banking sector crisis of 2009 had made it to have a negative net asset in its balance sheet. The crisis led to the sacking of the former Group Managing Director of the bank, Mr. Erastus Akingbola.  Alabi said that the bank had a non-performing loan portfolio of N158bn two years ago, but that the figure dropped by 25 per cent to N119bn last year owing to the intervention of AMCON. He said the huge NPLs impacted negatively on the bank’s financial performance as it recorded the highest loss in the history of banking operations in the country. He, however, added that with hard work and determination of the management, Intercontinental Bank returned to profitability in 2010 as it posted a profit of N65bn. Punch

CAPITAL MARKET

FG SELLS N70BN SOVEREIGN BONDS

The Federal Government has sold N70bn in three, five and 10-year sovereign bonds at its seventh debt auction of the year.  The Debt Management Office said on Thursday that it sold N30bn of the three-year papers, N15bn of five-year and N25bn of 10-year papers. The debt office also said that the papers were due to mature in 2014, 2015 and 2018 respectively, adding that all the papers were reopening of previous issues.  Reuters reported that yields were lower than at the previous auction in June, with the three-year paper allotted at a marginal rate of 10.24 per cent compared to 11.69 per cent last month, while the five-year instruments were allotted at 10.70 per cent, down from 12.75 per cent.  It added that the 10-year papers were allotted at a marginal rate of 11.49 per cent. The Central Bank of Nigeria, last month, eased restrictions on foreign investors holding of government debt for at least one year, a move meant to attract new offshore inflows into the country. DMO in a statement said, “The original coupon rates of 10.50 per cent, four per cent and 10.70 per cent for the three-year, five-year and 10-year offers respectively will be maintained. Total subscription stood at N157.98bn against N153.15bn last month.” The Federal Government issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit. Meanwhile, the naira is seen extending gains against the dollar in the coming week mainly due to dollar inflows from the energy sector, while greater offshore interest in Kenya’s bond market might support the shilling. According to currency dealers, the naira is expected to gain further next week as currency dealers anticipate increased dollar inflows from energy companies selling their month-end greenbacks to some lenders. Many of the oil firms operating in Nigeria usually sell dollars at the end of the month to obtain local currency for their domestic obligations. The naira traded at N152.15 per dollar at the inter-bank market on Thursday, stronger than N152.20 recorded on Wednesday. Punch

PAPER REVIEW

ZENITH BANK POSTS N35BN PROFIT

Zenith Bank Plc Monday reported impressive financial results for the second quarter (Q2) ended June 30, 2011 with profit after tax (PAT) rising by 44 per cent. The results made available to stockbrokers during trading by the Nigerian Stock Exchange (NSE) showed gross earnings of N122.84 billion, up by 27 per cent from N96.85 billion in corresponding period of 2010. Pre-tax profit rose by 38.2 per cent to N35.05 billion from N25.34 billion in the 2011, while profit after tax grew by 44 per cent from N21.3 billion to N30.67 billion in 2011. Also, margins firmed strongly as pre- and post- tax margins rose from 26.16 per cent and 21.99 per cent 2010 to 28.53 per cent and 24.97 per cent in 2011. The Chairman of Zenith Bank Plc, Mr. Steve Omojafor, had told shareholders at the Annual General Meeting (AGM) of the bank recently that even in the face of very challenging operating environment, the bank had maintained its culture of outstanding performance and industry leadership. According to him, the bank remains committed to delivering superior returns to its shareholders.  Shareholders of the bank received a dividend of N26.6 billion, which translates into 85 kobo per share for the year ended December 31, 2010. ThisDay

FG OFFERS SMES N75BN CREDIT FACILITY

The Federal Government has offered to release N75bn to Small and Medium Scale Enterprises across the country as a credit facility to strengthen their capacity for job creation. The Minister of Trade and Investment, Dr. Olusegun Aganga, disclosed that on Wednesday in Abuja at a Workshop on Attracting Investments into Nigeria. He said that the money would be disbursed to SMEs through the Bank of Industry and the Nigerian Import Export Bank at a single digit interest rate. Aganga said that the Federal Government would give priority attention to the development of SMEs in the next four years by providing the necessary incentives for their businesses to thrive.  He said, “One of the major areas of concern for the Federal Government is the growth and development of the Small and Medium Scale Enterprises. We have identified lack of access to credit as one of the major factors inhibiting the growth of SMEs in Nigeria. Very soon, the government will commence the disbursement of $500m credit facility to SMEs through the Bank of Industry and the Nigerian Import Export Bank at a single digit interest rate.” “The Federal Government is determined to restructure and reform the economy by creating the necessary macro-economic and regulatory environment, as a way of attracting Foreign Direct Investments and encourage ideas that can lead to the realisation of the full potential of our national resources,” he added. The Punch.