Concerns over MasterCard’s role in national ID card scheme

Concerns over MasterCard International’s involvement in Nigeria’s national identity management scheme, at the expense of competent indigenous payment systems, have been further amplified by recent United States (US) sanctions against Russia, regarding the latter country’s position in the Ukrainian turmoil, industry insiders say.

 As part of the sanctions, MasterCard, a global payment system, was mandated by the US government to stop serving clients of certain Russian banks related to the Russian government, whilst Visa halted operations with three more lenders.

 Now, MasterCard International is expected to roll out 13 million smartcards with electronic payments (e-payments) capability for Nigerian citizens and legal residents before the end of the year, under the National Identity Management System (NIMS) managed by the National Identity Management Commission (NIMC).

The implication of MasterCard’s involvement in Nigeria’s national identity card project is that rules that the US government institute which regulate or direct American companies (like Visa and MasterCard) would automatically impact Nigeria’s own financial system. “Every international card scheme has to follow rules and regulations of their (originating) country. There is a huge risk associated in selecting MasterCard International, a foreign company, for such a critical project as the national identity managment scheme.

Reduced Dollar Demand Bolsters Naira

The naira appreciated against the United States dollar across various market segments last week amid decreased demand for the greenback. Also, the market recorded improved dollar inflow.

Specifically, at the Central Bank of Nigeria’s (CBN’s) regulated forex market, which opened only on Wednesday due to last Monday’s public holiday, the central bank offered $400 million but sold $382.07 million to end-users.

This was 39.03 per cent lower that the amount sold the preceding week. The marginal rate of the naira was N155.73 to a dollar.

Also, at the interbank market, the naira strengthened week-on-week against the greenback by N1.21 to N161.20 following dollar sale worth $18 million by Chevron Nigeria to some banks.

The naira also appreciated at the Bureau De Change (BDC) and the parallel market segments by N2.50 and N3 respectively.

“This week, we expect exchange rate stability against the backdrop of improved external reserves and likely sale by oil companies to fund their month-end activities,” analysts at Cowry Asset Management Limited stated.

Nigeria’s external reserves stood at $38.103 billion last Thursday.

Snapshot of Nigerian banks performance for 2013

Twelve Nigerian banks have so far reported audited financial results for full year 2013 and we have decided to take a deeper look at their financials to see which bank is the market leader and which ones are underperforming.

Guaranty Trust Bank (GTB) is the clear leader in the Nigerian banking space as the lender tops the charts with respect to Return on Average Equity (RoAE), and Return on Average Assets (RoAA) of 29 percent and 5 percent respectively.

The banks remarkable efficiency is revealed by its ability to churn out N107.9 billion in pretax profits (PBT) almost double UBA’s N56.05 billion, even as its gross earnings of N242.2 billion were less than UBA’s gross earnings of N264.6 billion.

On the flip side, Fidelity Bank is the worst performer (among the group), returning just 5 percent on ROAE, and 1 percent on ROAA.

Fidelity also has the lowest overall PBT of N9 billion, on gross earnings of N126.9 billion. The banks underperformance is stark when compared with fellow tier-two lender Stanbic IBTC, which made N24.6 billion in pretax profits on N111.2 billion of revenues for 2013.

Regulation curbs profits forcing banks to change model

Nigerian banks grew profits at a slower rate in 2013, compared with 2012.

The Central Bank of Nigeria (CBN) increased CRR on public sector deposits to 75 percent from 50 percent last year and also told lenders to lower fees and commissions to reduce costs to customers.

The regulator raised requirements on private deposits to 15 percent from 12 percent on March 25 to reduce liquidity and support the naira.

As a consequence of tighter CBN regulations banks lent a larger portion of their deposits in 2013 compared to 2012.

The banks had hitherto preferred to invest in Government bonds and make huge profits on the margin between the interest rates they pay on deposits and interest they earn from bonds and Treasury-Bills.

Nigerian Banks however still look attractive as they have a long time to ride a secular growth wave of an under banked but increasingly wealthier population in need of financial services.

GTB, Diamond Bank and UBA are our top picks out of the group.

Source: BusinessDay

Service Wide Vote: N114 billion controversial releases

President Goodluck Jonathan

IT sounds so bizarre that allocations to some Federal Government agencies in excess of N114 billion have been lost in transit. But for a parliamentary inquest, the public would not even have known this. For President Goodluck Jonathan, always dismissive of the abysmal level of corruption in the country, this matter presents further evidence. Since March 14, the House of Representatives Committee on Public Accounts has been quizzing officials of the Budget Office, Central Bank of Nigeria, Police Force, Ministry of Police Affairs and Office of the Head of Service of the Federation on this tangled skein.

 At the behest of the President, Lamido Sanusi, the suspended Governor, Central Bank of Nigeria, had remitted N19.7 billion to the Ministry of Police Affairs, for the police to buy “armoured helicopters and security equipment.” Sanusi stated this in his reply to the government’s allegation of financial recklessness against him. Curiously, both the Inspector-General of Police, Mohammed Abubakar, and the ministry, told the House committee that they did not see the cash.

Similarly, the OHSF said it received just N17.6 billion out of the N52 billion purportedly released to it from the Service Wide Vote, between 2004 and 2012. Details of the allocations are as follows: N2.7 billion (2004); N9.8 million (2005); N701.7 million (2006); N896.3 million (2007); N5.3 billion (2008); N612.9 million and N70 million in 2009; N17.6 billion (2010); N13.6 billion in 2011; and N8.5 billion in 2012. It is apparent from these figures that only the 2010 allocation reached the OHSF. So, where is the balance of N35 billion?

Another N59.6 billion, which the Budget Office paid to the Nigerian National Petroleum Corporation as subsidy, as acknowledged by the Accountant-General of the Federation, Jonah Otunla, and passed through the CBN, is missing in transit.

ICAN intensifies training of accountants in IFRS reporting

The Institute of Chartered Accountants of Nigeria (ICAN) has intensified efforts in the training of accountants that specialise in handling financial reporting using the International Financial Reporting Standards (IFRS).

Kabir Alkali Mohammed, 49th president of ICAN, who made this known in Lagos recently, said that the Institute has trained over 2,000 members with the theoretical and practical knowledge of IFRS reporting.

Mohammed, who noted that Nigerians look on chartered accountants to bring their expertise to bear in the implementation of IFRS, stated that the Institute is committed to helping the nation to redefine its values and promote compliance to the international standards.

The ICAN boss, who said that the adoption of common high quality global accounting and financial reporting standards will facilitate investment and other economic activities across borders, confirmed that Nigeria has since adopted the IFRS reporting guidelines, which has become imperative in the financial reporting system in both public and private sector of economy.

According to him, “all the listed companies and significant public interest entities in Nigeria adopted IFRS on January 1, 2012 while all the public interest entities were expected to have adopted IFRS on January 1, 2013.

He disclosed that Small and Medium Scale Enterprises (SMEs) were mandated to key into the initiative on January 1, 2014, which according to him, means that all SMEs will statutorily issue IFRS based financial statements for the year ending December 31, 2014.

“Entities that do not meet the IFRS criteria for SMEs, shall prepare and issue their financial reports using SMEs guidelines on accounting that was issued by the Geneva-based United Nations Conference on Trade and Development (UNCTAD),” he added.

The ICAN boss further disclosed that the public sector will in addition to the IFRS reporting adopt the International Public Sector Accounting Standards (IPSAS) on January 1, 2015.

Source: BusinessDay

Growth outlook of the Nigerian services sector

The prospect of Nigeria becoming the leading economy in Africa is being realized. For two straight years (2011 and 2012) Nigeria led other African countries as the top destination for Foreign Direct Investment (FDI). Divestment of assets by the International Oil Companies (IOCs) resulted in Nigeria’s slip to second position in 2013 – the year global FDI flows also took a tumble as a result of weak economic conditions around the world. Remarkably though, much of the sold assets by the IOCs were snapped up by Nigerian indigenous entities, as local participation in the country’s oil and gas sector has increased. While this is cheery news, the truth is that Nigeria has made even more impressive progress with structural transformation of the economy. The nonoil sectors are now the key drivers of the country’s GDP growth, which is expected to rise to 7.3 percent in 2014.

Until recently, South Africa had for years maintained the status of the top destination for foreign investment on the continent: it was the top FDI recipient country, as well as the gateway for foreign investments into other African countries. Also, Nigeria had usually trailed Egypt in attracting foreign direct investment. But now, the signs are clear; whereas opportunities in South Africa have been significantly tapped, Nigeria has only recently come under the radar of global investors because of its frontier opportunities in several sectors including power, infrastructure, agriculture, solid mineral, retailing and services. Egypt is embroiled in a problematic political transition, while Nigeria is strengthening in democratic governance.  Besides, Nigeria’s population of 170 million makes her the biggest market in the African region. This being the case, Nigeria looks set to be the lead destination of private investment in Africa for a long time.

Peep into the Scenario

Nigeria: In First Quarter, Investors Count Losses As Share Prices Depreciate

A number of factors 'conspired' to depress share prices on the Nigerian Stock Exchange in the first quarter of the year as investors count their losses while analysts warn that the trend may continue in the wake of poor corporate information from quoted firms, reports Festus Akanbi and Sandra Alumona

For the army of investors who had banked on the nation's capital market for bountiful gains at the end of the first quarter of the year, the statistics on market performance released to the public last week was a great disappointment. According to reports, the Nigerian equities market recorded the highest decline in Africa in the first quarter ended March 31, 2014. The Nigerian Stock Exchange (NSE) All-Share Index, which measures the aggregate growth of the market, ended Q1 of 2014 with a decline of 6.2 per cent as the ASI fell from 41,329.19 to close at 38,748.01. The market capitalisation of the exchange shed N780 billion, declining from N13.226 trillion to N12.446 trillion.