RPT-Fitch: Nigerian banks are unlikely to repeat 2012 profit highs

(Reuters) - (The following statement was released by the rating agency)

Nigerian banks are unlikely to see a repeat of their robust 2012 profits because of increasing pressure on earnings, Fitch Ratings says. Tougher regulations together with higher funding costs are likely to constrain profitability over the next 18 months.

The central bank is focusing on consumer protection and encouraging financial inclusion in this post-crisis period. We expect new limits on bank charges imposed by the Central Bank of Nigeria to dent what have been highly profitable fees and commissions, particularly for those with largeretail franchises. The most significant impact is likely to arise from the gradual phasing out of "commission on turnover" - a customer transaction fee - by 2016.

East African Nations Seek Sino-Russian Funding for Joint Railway

Kenya, Uganda and Rwanda will seek funding from Russia and China for a planned $13 billion standard-gauge railway linking their capitals to boost trade.

The three countries will jointly mobilize the funds, although each nation will shoulder costs of its portion of the line, whose construction will cost $5 million per kilometer, John Byabagambi, Uganda’s minister of state for works, told reporters today in the capital, Kampala.

The initial phase, starting from Kenya’s coastal city of Mombasa linking to the capital, Nairobi, will start in November, he said. The entire project from Mombasa to the Rwandan capital, Kigali, through Kampala, will be concluded in March 2018, he said.

The project was agreed by Kenyan President Uhuru Kenyatta, Ugandan President Yoweri Museveni and Paul Kagame, the Rwandan leader, at a meeting in Kampala last month.

“The three countries are going to source funding together,” Byabagambi said. “We are looking at eastern countries and it is Russia and China which have excess funds.”

Source: Bloomberg

CRR Hike: Banks to Commence Aggressive Deposit Mobilisation

CBN Building

MPC decision to be implemented from August 7

Obinna Chima

The decision by the Central Bank of Nigeria (CBN) to sterilise public sector funds in Deposit Money Bank (DMBs) has made most financial institutions to start initiating strategies to mobilise deposits from other sources in the economy.

The Monetary Policy Committee (MPC) had raised the Cash Reserve Requirement (CRR) for public sector deposits to 50 per cent from 12 per cent while it left CRR for private sector funds unchanged at 12 per cent.

With this development, 50 per cent of public sector deposits which comprise deposits of all tiers of government, their ministries, departments, agencies and companies that are deposited in banks must be kept at the central bank and not lent out. The CBN intends to use this method to drain the excess money with banks, which had been put at N1.3 trillion. But the committee had left the Monetary Policy Rate (MPR) unchanged at 12 per cent. Also the Standard Deposit Facility and Standard Lending Facility were also held steady, at 10 per cent and 14 per cent respectively.

Nigeria: Polythene Waste is Wealth - Akinkuebi

Polythene production is a lucrative business in Nigeria, capable of generating jobs for the teeming unemployed graduates and other job seekers in the country. Though it is an area that has been largely neglected by the government. Young entrepreneurs aspiring to venture into this business may, however, be frustrated by the huge capital and technical expertise required, which is why Indian nationals have monopolised the industry in Nigeria.

Right from the sale of Eleme Petro-Chemical Company Limited (EPCL) to an Indian conglomerate, to mega factories they hold key stakes in, they have had it easy obtaining raw materials which are majorly petrochemical by-products obtained from refineries. A situation which has not favoured emerging Nigerian entrepreneurs in the industry as they have limited access to these raw materials.

It is this dominance that a Nigerian, Mr Olufemi Akinkuebi, is aspiring to challenge through his polythene production and packaging company. From just passing by watching the Indians produce polythene as a young man years ago, then travelling to China and meeting with manufacturers of the machinery to learn the latest technology, Olufemi says he is gearing up for the challenge of building a company that will be rated among the world leaders in polythene recycling and production in the next five years.

CBN Policy: Banks To Lose N45bn In Interest Income

Sanusi  Lamido Sanusi

The earning potential of banks across the country has received a major hit following the Central Bank of Nigeria’s decision to increase cash reserve requirement (CRR) on public sector deposits to 50 per cent up from 12 per cent.

Financial experts estimate that banks would lose no less than N45 billion in interest income following their inability to utilise 50 per cent of the deposits from the three tiers of government and their agencies.

The CBN’s Monetary Policy Committee led by Governor Sanusi  Lamido Sanusi introduced a 50 per cent cash reserve requirement on public sector funds on Tuesday after warning about the risk of excess liquidity in the system.

As a result of this policy, banks must keep as reserves 50 per cent of all deposits collected from the federal, state and local governments and all ministries, departments and agencies (MDAs) of government, thus reducing liquidity in the system.

17 PHCN Successor Companies For Public Listing – BPE

The Bureau of Public Enterprises (BPE),  said it would  ensure  that  the 17 Power Holding Companies of Nigeria (PHCN) successor companies and a good number of other companies are  brought  to the floor of the Nigerian Stock Exchange (NSE) for listing .

Speaking on the floor of NSE, the director- general of BPE, Mr. Benjamin Dikki, said that in the next few years, as the Nigerian electricity supply sector moves into the hands of private sector owners and mature, the 17 PHCN successor companies would come for listing.

The director-general said that the remaining government shareholdings in the DISCOs  being privatised through core investor sale strategy would  be divested through the Exchange. He stated that BPE has always been in partnership  with the  NSE.

“The relationship between the bureau, the NSE and the Nigerian capital market is a long standing one, ”he said.

Naira Hits 4-Week High On CBN Moves

The naira firmed to a four week high against the U.S. dollar on Wednesday, a day after the central bank tightened liquidity in the banking system to support a currency which had fallen two percent since May.

The naira closed at N159.9 to the greenback, its strongest since June 19 and against Tuesday’s close of N161.9.

On Tuesday the naira fell 0.37 percent to its lowest level in three weeks against the U.S. dollar on the interbank market, as dealers were anticipating that the central bank would lower its trading band on the currency, which did not happen.

Dealers said local units of French oil firm Total and Italian oil company Eni sold a combined $80 million to the interbank market, helping support the naira.

The Central Bank of Nigeria on Tuesday hiked the cash reserve requirement for public sector deposits — which accounts for ten percent of banking sector deposits — by a surprise 50 percent to tighten liquidity and curb speculation on the currency.

The cash reserve for government deposits was previously 12 percent.

CBN Introduces 50% CRR on Public Funds, Retains Interest Rate at 12%

 Says its financial report not subject to FRC's approval

Mallam Sanusi Lamido Sanusi

The Central Bank of Nigeria (CBN)  Tuesday introduced a 50 percent Cash Reserve Requirement (CRR) on all public funds deposits in the banks' possession. The new adjustment to CRR does not however, apply to private sector deposits whose CRR was retained at 12 percent.

The central bank said it took the decision because it discovered that there was over N1.3 trillion sitting in banks and belonging to government agencies.

This came just as the CBN Governor, Mallam Sanusi Lamido Sanusi refuted media reports that the Financial Reporting Council (FRC) had refused to approve its 2012 financial reports. Sanusi said contrary to media reports, the board of the CBN had the responsibility of approving its accounts which it had done.

Fitch Rates First Bank of Nigeria's Tier 2 Note Issue

(The following statement was released by the rating agency) LONDON, July 23 (Fitch) 

Fitch Ratings has assigned First Bank of Nigeria Ltd's (FBN; B+/Stable) planned subordinated debt (Tier 2 notes) a 'B-(EXP)'expected rating. 
The subordinated notes are issued by FBN Finance Company B.V (FBNF) as a special purpose vehicle. The structure of the notes is not yet finalised, and the final rating is contingent upon the receipt of final documents conforming to information already received. 

KEY RATING DRIVERS 
The notes are subordinated but have no coupon flexibility, principle loss absorption of equity conversion features. They qualify as Tier 2 regulatory capital under current Central Bank of Nigeria guidelines. Fitch has rated the notes one notch below FBN's Viability Rating of 'b' to reflect below average loss severity for subordinated relative to senior debt. No additional notches for non-performance risk have been applied. 

Hilton Leads Rush to Africa in Fastest Boom: Real Estate

A swimming pool is pictured at the Hilton Worldwide Inc. Alexandria Corniche, located in Alexandria, Egypt. Source: Hilton Worldwide Inc. via Bloomberg

Marriott International Inc. (MAR:US), Starwood Hotels & Resorts Worldwide Inc. (HOT:US) and Hilton Worldwide Inc. are turning to Africa, where a growing middle class and rising travel are fueling the fastest pace of hotel development in the world.

Marriott has increased the number of hotel rooms it plans on the continent by 55 percent from last year. For Starwood, revenue per available room in Africa and the Middle East is the highest of any region worldwide. The high-end Transcorp Hilton Abuja, in Nigeria’s capital, commands some of the steepest management fees in the world for its operator, according to Lagos, Nigeria-based hotel-consulting firm W Hospitality Group.

Hotel investors and operators, finding growth slowing in mature European and U.S. markets, are expanding in Africa as the continent is buoyed by increasing trade with countries including China and rising demand for services such as lodging. More than half of Africa’s countries probably will post gross domestic product growth of 5 percent annually through 2016, Economist Intelligence Unit Ltd. said.

Growing The Next Generation Of African Entrepreneurs

Fred Swaniker

Ghanaian-born Fred Swaniker, co-founder and CEO of the African Leadership Academy, believes educating Africa’s children is the key to meeting the continent’s myriad challenges.

Opened in 2008 on the grounds of a former printing training college in Johannesburg, South Africa, the leadership academy offers two-year programs in entrepreneurial leadership and African studies to students age 15 to 19. A full 85 percent of the academy’s students come from disadvantaged backgrounds across the continent.

The academy’s goal is to ensure that every graduate attains the skills necessary to succeed as a leader on the African continent. The school does this by identifying young leaders with potential, enabling them to practice leadership, and connecting them with transformative opportunities.

“There are about 400 million Africans below the age of 15 that have not been educated properly,” Swaniker said. “That’s a ticking timebomb.”

Swaniker, 34, left Ghana at the tender age of 4. His father was a lawyer and his mother, an educator. Every four years the family moved to a new African country — Gambia, Botswana, Zimbabwe — and he says he realized a lack of competent, ethical leadership was the main reason the continent was so poor.

Easy Taxi, Rocket Internet’s Latin American Hailo, Comes To Africa With Another $10M In Funding

Easy Taxi, a Brazil-based Hailo-like app incubated by the Samwer brothers’ Rocket Internet, is today announcing a $10 million round of funding and plans to tackle a whole new market: Africa, along with more expansion also in Asia and the Middle East. It is starting first in Nigeria, a country of 180 million people and one Africa’s the biggest in terms of economic growth. The announcement follows news from last week in which Rocket Internet itself got an injection of $500 million, specifically to help build out its startups in emerging economies.

Today’s round of funding comes from Africa Internet Holding, a JV between Rocket Internet and 35% owner, telecoms operator Millicom. This is the same pair that backed Easy Taxi with $15 million in June, through another JV, Latin American Internet Holding. That earlier round is being used to expand Easy Taxi in Latin America. So far, Easy Taxi has amassed 1,500,000 downloads and more than 45,000 taxi drivers in markets where it is active, which include Argentina, Brazil, Chile, Colombia, Ecuador, Malaysia, Mexico, Pakistan, Peru, South Korea and Venezuela.

“We want to bring this success to other attractive markets and we see high potential in many Asian and African countries,” said Dennis Wang, head of international expansion of Easy Taxi, in a statement.

Sacha Poignonnec, co-CEO of AIH, tells me that after Nigeria, Easy Taxi will go to eight more countries by the end of this year, including Morocco, Egypt, Ivory Coast, Ghana, South Africa, Algeria, Tunisia and Angola.

Africa's Richest Man, Aliko Dangote, Is Just Getting Started

Aliko Dangote

By Alexis Okeowo

Six years ago, Aliko Dangote paid a visit to Tanzania, on Africa’s eastern coast, and shared his dream of having an African-run business empire that would manufacture products all over the continent. To assorted government and business leaders, he announced that he was prepared to make an investment of $600 million to build a cement factory in southern Tanzania, alleviating the shortage in that country’s domestic cement supply. The Tanzanians were skeptical. “They didn’t believe us at all. They thought I was one of these ‘Nigerian 4-1-9’ scammers who try to go and scheme people out of their money,” Dangote says. “Or just one of these clever Nigerians who would come and be lying to them.”

The Tanzania story is clearly one Dangote relishes telling—not least because of how it’s turning out. Not long after his visit, his name appeared on a list of the world’s wealthiest people, and the Tanzanians realized they had been negotiating with Africa’s richest man. As founder and chairman of Dangote Group, he’s worth an estimated $16.3 billion, according to the Bloomberg Billionaires Index. “They pieced the two together,” Dangote says, sitting in his expansive Lagos office in late January. The room is so gigantic it appears nearly empty, even with tall plants, a conference table, and a large-screen television. Three months ago, Dangote Cement signed a final agreement there, with plans to produce 3 million tons of cement a year.

How Obama Can Make His Africa Trip Worthwhile

President Barack Obama (center) with (left to right) President Macky Sall (Senegal), President Joyce Banda (Malawi), President Ernest Bai Koroma (Sierra Leone), and Prime Minister José Maria Pereira Neves (Cape Verde) in the Cabinet Room of the White House on March 28 in Washington

On June 26, Barack Obama is making his second trip to Africa as America’s president. It’s questionable whether the trip is worth it—and not just because, as theWashington Post guesstimated, the trip’s price tag is as high as $100 million, including costs for fighter jet coverage as the First Family tours around. (That’s equivalent to two months of government health spending in Tanzania, a country of 46 million people.) A week of presidential visits to Robben Island and glad-handing local leaders will mean little if the U.S. doesn’t change policies to engage with the region more seriously.

European Union Commits 40 Billion Shillings to Kenya for Growth

The European Union pledged to give Kenya 40 billion shillings ($459 million) by 2020 to help the East African nation achieve its goal of faster economic growth that benefits the poor.

The funding may rise to as much as 50 billion shillings in the period, which would represent a 10 percent increase from the current level, EU Ambassador to Kenya Lodewijk Briet said today, according to an e-mailed statement. Discussions are under way to decide which projects the funding will support.

President Uhuru Kenyatta, elected in March, has vowed to boost growth in East Africa’s biggest economy to an annual 10 percent, create 1 million new jobs a year and lift 10 million people out of poverty by 2017. The country’s $37 billion economy is forecast by the government to grow 5.8 percent this year from 4.6 percent in 2012.

The European Union currently targets its funding to Kenya to help improve crop production and build roads, according to the statement. Kenya is the world’s largest black-tea exporter and it supplies one-third of the flowers traded in Europe.

Source: BloombergBusinessWeek