Nigeria Content Online

While much is yet
to be heard of the proposed minimum capital base of N1 billion for
stockbroking firms, some market operators said they believe that the
Securities and Exchange Commission (SEC) has ‘soft pedalled’ on the
issue.

The Nigerian Stock
Exchange had earlier this year said that all stockbroking firms must
meet the initial minimum capital base of N70 million required by the
SEC, the capital market regulator.

Rilwan Belo-Osagie,
managing director/chief executive officer of First Securities Discount
House (FSDH) Group, said too much capital base may put pressure on a
company’s performances.

“I think the
proposed N1 billion share capital for stockbroking firm is an overkill
because there is a danger in having too much capital in your business,”
Mr Belo- Osagie said yesterday at the company’s 19th Pre-Annual General
Meeting.

“When you have too much capital, it puts pressure on your returns and it can force you to take more risk,” he added.

He said one major challenge that financial institutions are presently facing is risk management.

“As an institution,
we should ask how much risk are you willing to take; how do you
dimension that risk; and what measures are being put in place to
mitigate that risk? I think management of risk is one of the biggest
challenges we all face,” he said.

He said about five
years ago, what financial institutions had to manage was credit risk,
“but now, because we are dealing with a lot of long term risk asset,
other risks too have to be managed; such as interest risk and market
risk.”

However, he said
management of reputation is also important because “we are finding it
extremely important to know what reputation does a financial situation
has today,” adding that the issue of reputation also touches on
corporate governance, which financial regulators have stressed.

Arunma Oteh,
director general of SEC, at a chief executive officer breakfast forum
in Lagos last week, said that corporate governance is key at restoring
investors’ confidence in the market.

“Corporate
governance, rather than being a cost, is a competitive tool of true
advantage to nations, firms and investors,” Ms Oteh said, adding that
besides the proven fact that well governed companies perform better
than their peers, “corporate governance immunises nations and companies
from the vagaries of financial crises.”

She said it also engenders accountability, transparency, and responsibility, and thereby creates better shareholder value.

She used the medium
to call on private companies to consider listing their shares on the
Stock Exchange, given the inherent benefits of improved national and
corporate profile, increased visibility, and enhanced capital resource
availability.

Meanwhile, Ese
Onosode, CEO FSDH Securities Limited, said earlier in the year there
was a strong possibility of the SEC increasing the capital base of
stockbroking firms to N1 billion, “but because we have regulators who
seem to feel the pulse of both the operators and the investors, I think
they have soft pedalled on that particular issue.”

Mr Onosode said he
believed the commission has been able to realise that increasing
capital base does not necessarily translate to the world-class capital
market which is its main objective.

Nigerian interbank lending rates climbed to 10.25 percent on
average last week, from 9.66 percent the week before, on the back of large cash
outflows to foreign exchange and bond purchases, traders said last weekend.

The secured Open Buy Back held stable at 9.50 percent, 200 basis
points above the central bank’s 7.50 percent benchmark rate and 4.5 percentage
points higher than the Standing Deposit Facility rate.

But overnight placement climbed to 10.50 percent from 9.75
percent, while call money rose to 10.75 percent from 9.75 percent last week.

Dealers said outflows to foreign exchange and other transactions
in the week drained liquidity in the system and pushed up the cost of borrowing
among banks.

Nigeria sold over $600m at its central bank foreign exchange
auctions last week, while a total of N70bn was sold in 3-year and 5-year
sovereign bonds.

“There was inflow from personnel costs to government agencies in
the week, which helped reduced the impact of outflows on the cost of fund in
the market,” one trader said.

The market opened with a balance of about N86bn ($555m) on
Thursday but the market is expected to be short this week because of the impact
of major outflows to foreign exchange and other transactions.

“We see the market becoming short this week and the cost of
borrowing inching up a bit until the next round of budgetary disbursements,”
another dealer said.

The Nigerian market will be closed until Wednesday for the
Easter public holiday and governorship and state assembly elections on Tuesday.

The indicative rates for the Nigeria Interbank Offered Rate
closed higher in tandem with short-term funds, with the 7-day fund rising to
11.15 percent from 10.91 percent a week earlier.

The 30-day fund inched up to 12.33 percent from 12.12 percent,
the 60-day was up to 13 percent from 12.91 percent, while the 90-day dropped to
13.45 percent from 13.60 percent.

REUTERS

Agriculture, that
ineffable bit of the domestic economy. Still rain-fed, and (I would
imagine) still managed pretty much the same way our forebears used to
before the first encounter with the Caucasian slave-trader/would-be
colonialist. In spite of this, today, agriculture accounts for
two-thirds of domestic employment (most who have a view on this put its
share of rural employment a lot higher); and almost half of domestic
annual output growth. Based on these latter numbers, policy people, and
indeed any government that wants to positively affect the lives of the
greatest number of Nigerians in the shortest time possible, cannot but
focus on the agriculture sector. China’s example since 1979 bears this
position out. Incidentally, one of the major benefits of the reforms
that have driven the rapid growth in China – the rise in rural incomes
– is a major, unrealised, goal of agriculture policy here.

Between 1978 and
1985, rural GDP grew in China on the back of the dismantling of the
agriculture collectives previously run by the Peoples’ communes.
Expectedly, post-reform, the prospects of enhanced income growth as
household earnings became contingent on each homestead’s output had
multiplier effects on the larger economy. The contract responsibility
system, which replaced the old land-ownership structure, had another
major boon: a richer countryside drove its own supply for meat, and the
increased cereal production levels required to grow the beef. According
to one source, on the strength of these reforms alone, the portion of
the population in China living below the poverty line fell during this
period by 17.86 million annually, from 250 million in 1979 to 125
million in 1985. Or, put differently, the incidence of poverty in a
country of well over a billion people, dropped to 14.8% from 31% over
the same period.

All of China’s
experience notwithstanding, and despite a lot of talk to the contrary,
we have not been able as a nation to change the fortunes of the
agriculture sector, and by extension of our rural communities. Truth be
told, government policy has not altered the fortunes of any sector of
the economy, bar the serendipitous outcomes from the GSM license
auctions. In part, this is the result of a major policy failure. To
date, government policy at all levels has focussed on setting financial
and input targets for its intervention in the sector. According to a
recent Mckinsey survey, the former targets lack the precision proper
for both monitoring and measurement, while the latter target suffers
from an even greater failing. Despite the huge government outlays on
subsidising fertilizer use on the continent, the report, “Four Lessons
for transforming African Agriculture” estimates the continent’s use of
fertilizers (24 kilogrammes per hectare) at “only one-quarter of the
world average”.

Obviously, a part
of this dismal number is because official subsidies for supply-side
inputs (fertilizers, seeds, etc.) were privatised and never got to the
intended beneficiaries. However, a larger part of the policy riddle has
been the failure of past interventions to factor in demand-side
considerations. Were policy to have succeeded in securing the increases
in agricultural output that was aimed at, where would this have ended
up? No warehouses close enough to farm gates to store extra production.
No roads to evacuate produce to consumers in the urban areas. And
lastly, the problems with power supply over the last twenty years have
limited processing possibilities. Apparently, without due thought to
demand-side responses, the increase in farm output which our
governments’ policies have aimed at over the years would probably have
failed “to produce economic gains and (would have made) it hard to
carry on with the” programmes.

Building on these
insights, Mckinsey’s four lessons turn out to be pretty obvious ones:
focusing on high-impact initiatives; developing markets to complement
supply measures, creating clear roles for the private sector in the
design and implementation of the preferred strategy, and ensuring that
implementation capacity is a key part of whatever intervention
strategies are designed.

Clearly, there is a
dialectic relationship between the theoretical basis on which
interventions in the agriculture sector are constructed, the design and
analysis of options for reaching the desired goals, and how we
eventually manage the preferred options. The problem, however is that
we have failed as a country to understand this relationship across the
entire economy; not just in the agriculture sector.

The Federal Government hopes to take full advantage of the
opportunity to participate in the forthcoming World Economic Forum (WEF) in
South Africa, to build on its soaring investor rating following the positive
outcome of the country’s recent elections.

The WEF, which usually provides the meeting point every year for
policy makers in government and managers of the world’s economic systems and
key financial institutions, is scheduled for Cape Town, South Africa between
May 4 and 6, 2011.

Managing Director, Nigeria Export-Import Bank, Robert Orya, told
NEXT in Abuja last weekend that there is no better opportunity than now for Nigeria
to launch an aggressive drive for foreign investment in the country, by taking
advantage of its participation in the forum.

“WEF is a very important and strategic gathering for high level
economic policy makers. That is why all countries, institutions and
organizations would attend. As an institution that is aspiring to become the
leading export development bank in Africa by 2015, NEXIM should be in that kind
of forum to learn how the continent is developing and how the bank can adjust
its strategies to help actualize its aspirations and objectives,” Mr Orya said.

“Nigeria has a lot of undeveloped potentials in the solid
minerals sector, because of the capital intensive nature of investments
required as well as the absence of the requisite legal framework. But, with
what is happening in South Africa, where government is planning on making laws
to nationalize investments in the sector, a lot of investors are interested in
coming to Nigeria to invest. Therefore, attending WEF will provide Nigeria the
opportunity to meet and interact with potential investors to convince them to
come.

“Before now, investors were very skeptical about coming to
Nigeria to do business. But, with what has happened with the recent elections,
Nigeria’s investor rating has received a massive boost, and government wants to
capitalize on the positive situation to sustain momentum by mobilizing
international investors to come to the country and take up the opportunities
available in these critical sectors of the economy,” he said.

According to him, with its corporate transformation programme
designed to harness the potentials of the resources in the country’s
agriculture, manufacturing, solid minerals and transportation sectors, the
forum would serve a veritable opportunity to meet and share ideas and
information with potential investors hoping to come into the country to do
business.

Besides, he pointed out that as a multilateral institution,
NEXIM wants to seize the opportunity to meet with its contemporary
institutions, like the African Development Bank and African Finance Corporation
(AFC) to leverage on its balance sheet by exploring the prospects for more
lines of credits that would enhance its capacity to avail Nigerian exporters
the benefits of easy access to affordable financing facilities for their
businesses.

“If foreign investors are attracted to come and set up in the
country, prospects of job creation would not only be increased for the youth,
but it would also help create wealth for the people, while the country would
benefit from huge foreign exchange earnings from the economic activities of
such investors, which will enhance the national gross domestic product,” he
noted.

On some of its ongoing initiatives, the NEXIM boss said
significant progress is being made towards realizing the objectives of the
global bio-fuel project, which it is offering international advisory services
in conjunction with the AFC and two other Nigerian banks, adding that when
completed the project help provide alternative source of energy to the country’s
agricultural sector to enhance its productivity.

He said consultants commissioned to carry out feasibility
studies on the viability of the sea link project has certified that the idea
has potential to help deepen trade within the Economic Community of West
African States, adding that the bank is determined to pursue it as part of its
commitment to the development of the transportation sector and grow
intra-regional trade.

“The agricultural sector is another massive area that is virtually
neglected. NEXIM is on course to help revive the sector. We are encouraged with
the level of support from our major shareholders – the Central Bank of Nigeria
and Federal Ministry of Finance Incorporated. With this level of buy-in, our
level of capitalisation has significantly improved, to help meet our current
level of business operations.”

The Nigerian naira is seen strengthening in the week, lifted by
dollar flows from the energy sector, and the Ugandan shilling is expected to
weaken if food and fuel price protests persist, traders said. Nigeria

Nigeria’s naira could strengthen on expectations of large dollar
inflows from energy companies and the conclusion of presidential elections that
saw President Goodluck Jonathan retain his position.

The naira was trading at 154.65 to the dollar last week but
dealers said the election of Mr Jonathan was a positive signal that there would
not be any major policy shift. “We see confidence returning to the economy and
possible foreign investors gradually considering some level of investment in
the country with the successful completion of the presidential election,” one
currency trader said.

Dollar demand has been persistently high in the run-up to the
elections as businesses and wealthy Nigerians took long positions to hedge
against the risk of instability around the polls. “Now we are not expecting any
significant shift in policy. That is good for planning and also confidence in
the economy,” another trader said. The state-run energy company and some multinational
firms are also expected to offload dollars as part of their month-end sales
cycle, which would boost supply and help support the local currency, traders
said.

Kenya

The Kenyan shilling is seen easing marginally against the
greenback next week with anticipated dollar demand from the energy sector,
while inflows were not expected to offer a major boost to the local currency.
Vimal Chudasama at Chase Bank said he expected dollar demand to pick up and
weaken the shilling slightly. “I don’t see inflows from agriculture and tourism
sector from the Easter period affecting the shilling much,” said Mr Chudasama.

Some traders see the shilling getting some reprieve from rising
local interest rates, which typically attract offshore investors seeking
relatively better returns by holding Kenyan government securities. Dickson
Magecha, a senior trader at Standard Chartered Bank, said yields were expected
to continue rising, boosting the local currency.

Uganda

The Ugandan shilling was slightly weaker against the dollar on
Thursday, and traders said it could ease further if protests over rising food
and fuel prices persist.

Commercial banks quoted the shilling at 2,373/2,378 to the
dollar, weaker than last Thursday’s close of 2,353/2,358. Protests over rising
food and fuel prices erupted in the country’s capital for the fourth time on
Thursday, and opposition leader Kizza Besigye was remanded until April 27 for
participating in an unlawful assembly. “If the protest persists, I see the
shilling weakening further because it could deter any major (dollar) inflows,”
said Peter Mboowa, a trader at Kenya Commercial Bank Uganda. “I expect it to go
to 2,400 next week if the protest persists. We have very minimal inflows at the
moment.”

Traders said demand from the oil and telecom sectors could
further weigh on the local currency next week. “Business demand will normally
come from the energy sector and telecoms sector,” said Ali Abbas, a trader at
Crane Bank. Traders expected the shilling to trade in the 2,370-2,400 range
against the greenback in coming days.

Tanzania

The Tanzanian shilling is expected to hold steady and to
strengthen in coming months as export proceeds from coffee and cashew nuts
start coming in. Commercial banks quoted the shilling at 1,510/1,515 to the
dollar, the same as last week’s close. “There is some demand but the central
bank has been providing support to stabilise the market,” said Hakim Sheikh, a
trader at Commercial Bank of Africa, Tanzania.

Traders said the shilling will likely trade around the 1,510
levels in the coming week. “Looking forward, we expect the shilling to remain
firm and strengthen in June and July when dollar inflows from coffee and cashew
nut exports come in,” said Msafiri Absolom, a trader at Tanzania Investment
Bank. In the week to Wednesday, the central Bank of Tanzania traded $21.25
million on its Interbank Foreign Exchange Market, according to statistics on
its website.

Ghana

The cedi strengthened 0.89 percent against the dollar for the
week-to-date, pushing it to three-month highs, driven by bank and offshore
investor demand for local currency ahead of a 320 million cedi bond issue set
for April 27.

The cedi was quoted at 1.4965/90, from Wednesday’s close of
1.4985/1.5010. “We see immediate support at $1.4900, a breach of it will
quickly expose the 2011 open levels of $1.4800 in the coming sessions,” Jacob
Brobbey, a trader at Barclays Bank Ghana, said in an email.

Analysts expect the bond to be oversubscribed, with over 90
percent soaked up by foreign investors. But, the short-term gains will not
diminish underlying policy concerns, said Sampson Akligoh from investment house
Databank. “I think that the gains will be inevitable during the bond season,
but as the inflows on the back of the bond dries up, the intra-day losses and gains
will re-emerge,” Mr Akligoh said by email.

Christopher Nettey from Stanbic Bank said the yield on the bond
to come in at 12.5-13 percent.

Zambia

The kwacha is expected to remain stable against the dollar in
the week to next Thursday due to balanced demand and supply for the local unit
and the United States (US) currency.

Commercial banks on Thursday quoted the kwacha at 4,685 from
4,695 a week ago.

“We expect this to hold because demand and supply is balancing
and we see nothing significant to tip this balance,” one trader said. Zambia’s
currency met firm resistance around 4,600 during 2010. On the few occasions it
breached that level, it went on to test but failed to breach 4,550.

REUTERS

Agriculture, that
ineffable bit of the domestic economy. Still rain-fed, and (I would
imagine) still managed pretty much the same way our forebears used to
before the first encounter with the Caucasian slave-trader/would-be
colonialist. In spite of this, today, agriculture accounts for
two-thirds of domestic employment (most who have a view on this put its
share of rural employment a lot higher); and almost half of domestic
annual output growth. Based on these latter numbers, policy people, and
indeed any government that wants to positively affect the lives of the
greatest number of Nigerians in the shortest time possible, cannot but
focus on the agriculture sector. China’s example since 1979 bears this
position out. Incidentally, one of the major benefits of the reforms
that have driven the rapid growth in China – the rise in rural incomes
– is a major, unrealised, goal of agriculture policy here.

Between 1978 and
1985, rural GDP grew in China on the back of the dismantling of the
agriculture collectives previously run by the Peoples’ communes.
Expectedly, post-reform, the prospects of enhanced income growth as
household earnings became contingent on each homestead’s output had
multiplier effects on the larger economy. The contract responsibility
system, which replaced the old land-ownership structure, had another
major boon: a richer countryside drove its own supply for meat, and the
increased cereal production levels required to grow the beef. According
to one source, on the strength of these reforms alone, the portion of
the population in China living below the poverty line fell during this
period by 17.86 million annually, from 250 million in 1979 to 125
million in 1985. Or, put differently, the incidence of poverty in a
country of well over a billion people, dropped to 14.8% from 31% over
the same period.

All of China’s
experience notwithstanding, and despite a lot of talk to the contrary,
we have not been able as a nation to change the fortunes of the
agriculture sector, and by extension of our rural communities. Truth be
told, government policy has not altered the fortunes of any sector of
the economy, bar the serendipitous outcomes from the GSM license
auctions. In part, this is the result of a major policy failure. To
date, government policy at all levels has focussed on setting financial
and input targets for its intervention in the sector. According to a
recent Mckinsey survey, the former targets lack the precision proper
for both monitoring and measurement, while the latter target suffers
from an even greater failing. Despite the huge government outlays on
subsidising fertilizer use on the continent, the report, “Four Lessons
for transforming African Agriculture” estimates the continent’s use of
fertilizers (24 kilogrammes per hectare) at “only one-quarter of the
world average”.

Obviously, a part
of this dismal number is because official subsidies for supply-side
inputs (fertilizers, seeds, etc.) were privatised and never got to the
intended beneficiaries. However, a larger part of the policy riddle has
been the failure of past interventions to factor in demand-side
considerations. Were policy to have succeeded in securing the increases
in agricultural output that was aimed at, where would this have ended
up? No warehouses close enough to farm gates to store extra production.
No roads to evacuate produce to consumers in the urban areas. And
lastly, the problems with power supply over the last twenty years have
limited processing possibilities. Apparently, without due thought to
demand-side responses, the increase in farm output which our
governments’ policies have aimed at over the years would probably have
failed “to produce economic gains and (would have made) it hard to
carry on with the” programmes.

Building on these
insights, Mckinsey’s four lessons turn out to be pretty obvious ones:
focusing on high-impact initiatives; developing markets to complement
supply measures, creating clear roles for the private sector in the
design and implementation of the preferred strategy, and ensuring that
implementation capacity is a key part of whatever intervention
strategies are designed.

Clearly, there is a
dialectic relationship between the theoretical basis on which
interventions in the agriculture sector are constructed, the design and
analysis of options for reaching the desired goals, and how we
eventually manage the preferred options. The problem, however is that
we have failed as a country to understand this relationship across the
entire economy; not just in the agriculture sector.

Nigerian interbank lending rates climbed to 10.25 percent on
average last week, from 9.66 percent the week before, on the back of large cash
outflows to foreign exchange and bond purchases, traders said last weekend.

The secured Open Buy Back held stable at 9.50 percent, 200 basis
points above the central bank’s 7.50 percent benchmark rate and 4.5 percentage
points higher than the Standing Deposit Facility rate.

But overnight placement climbed to 10.50 percent from 9.75
percent, while call money rose to 10.75 percent from 9.75 percent last week.

Dealers said outflows to foreign exchange and other transactions
in the week drained liquidity in the system and pushed up the cost of borrowing
among banks.

Nigeria sold over $600m at its central bank foreign exchange
auctions last week, while a total of N70bn was sold in 3-year and 5-year
sovereign bonds.

“There was inflow from personnel costs to government agencies in
the week, which helped reduced the impact of outflows on the cost of fund in
the market,” one trader said.

The market opened with a balance of about N86bn ($555m) on
Thursday but the market is expected to be short this week because of the impact
of major outflows to foreign exchange and other transactions.

“We see the market becoming short this week and the cost of
borrowing inching up a bit until the next round of budgetary disbursements,”
another dealer said.

The Nigerian market will be closed until Wednesday for the
Easter public holiday and governorship and state assembly elections on Tuesday.

The indicative rates for the Nigeria Interbank Offered Rate
closed higher in tandem with short-term funds, with the 7-day fund rising to
11.15 percent from 10.91 percent a week earlier.

The 30-day fund inched up to 12.33 percent from 12.12 percent,
the 60-day was up to 13 percent from 12.91 percent, while the 90-day dropped to
13.45 percent from 13.60 percent.

REUTERS

As more banks reel out their 2010 year end reports, industry watchers have observed that the sector has shown remarkable improvement and signs of quick recovery from the impact of the 2009 financial crisis. Most of their earnings are back in the green, although it has not been an entirely smooth ride.

Finance experts think investors should keep an eye out for low-hanging fruit as the 2010 bank’s balance sheet cleansing, an aftermath of the crisis, would place the banks on a clean pedestal and effectively put paid to the days of provisioning surprises, with the intervention of the Asset Management Corporation of Nigeria, AMCON.

The AMCON was set up last year to absorb bad bank loans by exchanging them for government-backed bonds. So far, N1.7 trillion (US$11.0 billion) bond has been issued since April.

It also announced that it had cleared all bad bank loans and was on course in its efforts to recapitalise lenders rescued by the US$4.0 billion bailout in 2009 by the end of the second quarter this year.

Fidelity Bank had earlier in the month released its 2010 year-end figures with a profit before tax of N8.6 billion. Reginald Ihejiahi, the MD/CEO of the bank, said he is pleased with the progress made by the bank in improving profit and operating performance of its business in the financial year.

The bank recorded a 61.45 per cent increase in gross earnings, from N34.7 billion in 2009 to N56 billion. Profit before Tax (PBT) also increased by 312 per cent from N2, 054 billion in 2009 to N8, 468 billion in 2010, while Profit after Tax (PAT) increased by 292 per cent from N1, 557 billion in 2009 to N6, 105 billion in 2010.

Deposits also increased by 13.41 per cent from N288 billion to N326 billion and declared a dividend of 14 kobo.

“Efforts to rework our funding structure to a more sustainable and efficient deposit mix is showing in strong positive growth in demand and savings deposits, and reduction in high cost deposits with a resultant improvement in Net Interest Margin (NIM). We expect this trend to provide the anchor for further improvement in our operating performance in 2011 as we seek increased market share,” Mr Ihejiahi said in a statement.

Looking into the books

Adesoji Solanke, banking analyst, Renaissance Capital, an investment bank, said “the bank’s earnings were below estimates mainly due to a margin pressure and much higher than expected provisioning charges in the fourth quarter.”

“2010 was still a clean-up year for Fidelity, but we note that given its relatively high Non Performing Loan (NPL) ratio, provision write-back potential is high for this post-AMCON, in our view. We like the cost focus and revival in loan growth, as well as its strong 53.2 per cent liquidity and 44.0 per cent capital adequacy ratios, which place it in good stead to witness above average NIM expansion and loan growth in 2011,” Mr Solanke said.

Afrinvest, a finance analysis firm, said the result looks decent relative to its prior year figures.

“Notably, we find that the bank’s performance in the fourth quarter was really poor, particularly from an earnings perspective. We are inclined to believe that the bank’s rather disappointing net earnings figure derives from its cost of risk, perhaps taking a much larger impairment for bad loans as against a potential write-back from loan recoveries.

“We also did not expect a significant increase in operating costs, given the cost containment measures employed by management following the onset of the banking reforms,” Afrinvest said.

On the other hand, Skye Bank’s gross earnings fell 36.1 per cent to N84.0 billion in its 2010 year-end figures, from the N131.5 billion reported for in 2009. The bank returned to profitability with pre and post-tax profits of N12.7 billion and N10.4 billion, having barely managed to break even in the preceding year.

Commenting on the results, Afrinvest said these are “decent results considering the fact that the prior year numbers was for a 15-month period. The bank’s gross earnings that were 2.5 per cent shy of our N86.1 billion target, while PBT and PAT fell 7.7 per cent and 6.8 per cent short of our N13.7 billion and N11.2 billion estimates respectively.”.

“While we have yet to speak with management regarding the finer details behind these figures, we however find this to be very much in line with our expectations. We had expected a progressive expansion in NIMs, given the reduction and subsequently low funding costs prevalent for most of 2010, to compensate for the expected drop in interest earnings,” the finacial firm added.

The firm says it would attribute the recovery in the bank’s net earnings to a much lower cost of risk, having taken substantial write-downs in 2009 as well as some potential write-backs from loan recoveries.

First Bank posted Gross Earnings of N230.6 billion, 18.9 per cent higher than the N194.0 billion posted for the period ended December 2009. The bank reported pre and post-tax profits of N43.2 billion and N33.4 billion, 16.4 per cent and 12.7 per cent lower than industry watchers expectation.

Efficiency challenges

Afrinvest expressed concerns over the possibility of First Bank experiencing efficiency challenges in 2010.

“Despite the improvement in bottom line numbers, the bank’s overall performance fell below our expectations. We reckon the bank has taken the much debated general provisioning of 1.0 per cent of performing loans (estimated at about N10.0 billion) as required by the Nigerian GAAP. This may have been responsible for this below-than expected performance,” the firm said.

“Overall, this performance falls short of our expectations and trails the average performance of Tier-1 banks (excluding UBA). With pre and post-tax margins of 18.7 per cent and 14.5 per cent respectively, First Bank’s profit margins are below the Tier-1 bank average of 25.4 per cent and 19.6 per cent. This suggests efficiency challenges within the bank” Afrinvest further said.

For the UBA, industry watchers said the bank’s report appears daunted with a higher cost profile on the back of its increased regional presence, which has impacted its profitability negatively.

The bank posted earnings of N185.2 billion, a 5.2 per cent decline from the N195.3 billion (annual figure) reported in 2009.

Finance experts also added that increased provisioning charge (exceptional item charge of 12.7 billion) greatly impaired the profitability of the bank.

“This performance clearly highlights the bank’s inability to leverage its size and presence in about 19 countries to translate scale to profits, in spite of the relative improvement in Nigerian banks’ operating environment, especially in the 4th quarter of 2010. This performance has further reinforced our view that the bank underperforms tier 1 peers without demonstrating capacity for improved operating efficiency,” Afrinvest said.

The bank’s profit before tax and exceptional items stood at N16, 541 billion in 2010, up from N13, 662 it reported in 2009 by 21 per cent. Profit after tax stood at N1, 254 billion in 2010 from N2, 375 billion in 2009.

The bank’s gross loans and advances were down by 1.3 per cent from the N636.8 billion reported for 2009 to N628.8 billion. Deposits grew at 1.8 per cent to N1.267 trillion. Net Assets were down 4.0 per cent from N186.8 to N179.4 billion while asset quality (NPL) also deteriorated during the period under review.

“Non performing loans worsened from 7.9 per cent in 2009 to 8.8 per cent, the highest within the tier 1 banking universe. This negatively impacted the bank’s profitability as provisioning charges were higher than expected. Overall, our short to medium term outlook on UBA remains downbeat,” Afrinvest said.

Emmanuel Nnorom, the bank’s executive director, finance, said, “But for the N12.7 billion exceptional items taken during the period, net profits would have been stronger. Of the N12.7 billion, N5.7 billion resulted from the loans sold to AMCON, while N7 billion represents special assets being written off since the last three financial periods arising from legacy Continental Trust Bank (CTB),” Mr Nmorom said.

RenCap says the figures show another massive clean-up year for UBA in 2010.

“As 2011 is expected to be another clean-up year, although to a lesser degree, full earnings and RoE recovery at UBA will be shifted into 2012, in our view. Nevertheless, the expected NIM uplift accompanied by generally not-excessive cost growth and 15 per cent loan growth should strengthen the bank’s operating profit in the coming year, we think,” he said.

The release of banks’ 2010 results season kicked off in late March. Zenith, GTB, and Access were the first three to release theirs to the public. Diamond, Stanbic IBTC, FCMB, and Eco Bank also followed suit.

The consensus is that in terms of asset quality, non performing loans did not do justice to the profits of some banks. The banks were meant to submit their reports to the Central Bank before 31st March and publication should be before 30th April. Analysts hope with this healthy report banks may have leapt out of the debts of the past.

How would you like to spend your retirement years? Will your nest egg be able to provide the kind of lifestyle that you have become accustomed to and how much will it cost?

Sadly, many people end up impoverished in their later lives or are totally dependent on their children or other family members. Yet other retirees are redefining retirement as an exciting time to explore new interests. No longer the end of work life, it has become a new beginning, often the start of a new career, world travel, going back to school, starting a new business venture, spending more time with family, or engaging in high-impact philanthropic ventures that change lives.

Here are some issues to consider as you plan for your retirement.

How much money will you need?

Thanks to the Pensions Reform Act, 2004, most of us are aware of the importance of pensions and retirement planning. Pensions, while they are an important part of retirement income, will very rarely cover all your retirement needs if you wish to maintain a certain standard of living during your retirement years. Your retirement income should be supplemented with income from other personal savings and investments.

Everyone’s retirement goals are unique and a function of their own age, stage, and financial situation. As life spans get longer, it is not unusual nowadays to spend over 20 years in retirement, so you need to be sure that your financial resources can last as long as you do. If you were to retire at 60 and then lived for at least another 20 years, how much income would you need for each year of your retirement, and how much do you have to save now to generate that kind of income to afford the lifestyle you desire?

Your current income is a good starting point for calculating your retirement savings needs. Experts estimate that most people will need between 65 percent and 80 percent of current income to maintain their current lifestyle when they retire. Online retirement calculators are available at several websites including those of the Pension Fund Administrators. These are useful tools to help you to estimate how much you will need in retirement.

Start early

In your 20s and 30s, retirement seems a lifetime away, but it’s never too early to start planning for it right from your first job. Those who start saving for retirement in their 20s have a better chance of building a large nest egg and achieving sustained financial success.

Educate yourself

Financial security and knowledge are closely linked. It is important to have a broad understanding of the basic investment principles; how you save is just as important as how much you save. Educate yourself on the different savings options available and what might work for you.

How much risk can you afford to take?

Your investment portfolio should be tailored to reflect your age, the amount of money you have and will need, and your risk tolerance. Inflation and market volatility have forced investors to face the reality of their financial position. With the spectre of inflation always lurking, and the possibility of spending more than two decades in retirement, your investment earnings will have to keep pace in order for you to have any chance of maintaining your current standard of living.

The type of investments you make play an important role in how much you would have saved at retirement. A diversified portfolio of cash, bonds, stocks and real estate will help to protect you from investment risk. You don’t want all your retirement funds invested in high-risk investments; in spite of the higher yields this might generate, you need to balance risk and return in order to achieve your goals. The asset allocation will largely depend on your risk tolerance and how long you have until your retirement.

Health is wealth

The reality of declining health as we age should be addressed seriously in retirement planning. Even the most elaborate retirement savings and investment plans can be decimated if you find yourself with health challenges and without adequate health insurance in place. No matter how healthy you currently are, build a financial cushion that allows for unexpected expenses and do not ignore your health insurance.

Enjoy your retirement

After several years of hard work, your retirement years should be one of the most rewarding of life’s stages and an opportunity to fulfil the dreams that you finally have the time to pursue, free from routine constraints. Make saving for retirement a priority and start now.

CBN governor,
Sanusi Lamido Sanusi, on Wednesday, restated the commitment of the apex
bank to building a virile financial system in the country. Mr Sanusi
made the statement at a public hearing on bills to establish the
Nigerian International Financial Centre (NIFC), Office of the Nigerian
Financial Obudsman, and National Alternative Dispute Resolution
Commission.

The hearing was
organised by the House of Representatives Joint Committee on Banking
and Currency, Finance, and Justice. The bills seek to establish the
centre for the purpose of creating a world-class financial zone that
would act as a catalyst for economic growth.

Mr Sanusi said that
with the financial meltdown witnessed globally, the CBN was committed
to put in place a sound financial system, adding that a comprehensive
insurance bill would soon be introduced to the National Assembly for
consideration.