Inflation fuelling increased ATM cash withdrawal – First Bank

Group Head of e-Buisness FirstBank Nigeria Limited, Mr. Chuma Ezirim provides highlights into trending issues in the electronic payment (e-payment) space as well as the bank’s efforts to encourage customers to embrace cashless transactions. By Babajide Komolafe NIBSS reported that Nigerians withdrew N4.7 trillion through ATMs in 2016. Why are we will still depending so much on cash despite cashless policy initiatives? The cashless policy initiative is evolving and work in progress and as such yet to address all of the mass market needs in the market. Also cash still remains the primary and preferred means of transacting in mass to lower affluent segments of the market. ATM remains the most popular electronic channel. The structure of the POS Business in the country is still fluid, while the other non-cash payment options like USSD, QR Code, and Web are still emerging. The dollar exchange rate against the Naira created a burden on the people and a hike in the prices of goods and services in the country (Inflation also increased from 10.4 per cent in December 2015 to 18.5 in December 2016). Hence, people needed more cash to buy fewer goods as the value of naira became weak. Chuma Ezirim, Group Head, e-Business FirstBank Despite increased roll-out of PoS and mobile app, lots of merchants (petrol stations, traders, etc) do not have or offer e-payment channels to customers. What is the challenge of banks in this regards and how is your bank responding to this challenge?  The reasons given above on the slow progress of the cashless initiative, also affect adoption rate by merchants. In the case of POS, the uptake is also hampered by the current POS operating model in the country which makes the business unprofitable to Banks/Acquirers and prevents sizable investment in the channel.  In the case of Mobile Apps, the platform is currently not widely adapted to payments. Most of the solutions on typical mobile banking apps are not adapted to payments. However, industry-wide efforts are ongoing to introduce mobile payment solutions such as USSD and contactless payments (QR Codes, NFCs etc.) Some banks, including FirstBank, in recent times have launched various mobile payment applications. What is the prospect that Nigerians will embrace the culture of using the phones for payment? Transactions on non-cash payment channels have continued to witness impressive growth in recent past. In the last two years alone transactions on our mobile platforms grew by over 2,300 percent. Also, Nigeria leads other markets in Africa in terms of growth of Mobile penetration. At 40 per cent penetration, and 75 million unique mobile users, Nigeria has huge potentials in this area. It is noteworthy that in similar markets such as Brazil and Kenya, mobile payment is widely accepted and can be said to have been successful.  Besides the roll-out of epayment channels, how is FirstBank encouraging their customers to embrace cashless transactions? FirstBank has a point- based Loyalty Scheme and Merchant Discount Incentive initiative that reward customers when they make use of non-cash channels for their transactions. We also employ a continuous customer education and campaigns on an ongoing basis. The world has witnessed upsurge in the rise and use of virtual currencies like Bitcoin, in your view, what should be the appropriate response from the banking industry and the government? The virtual currencies have a number of advantages such as cost savings and speed, which banks cannot afford to ignore. The profile of an average bank customer has changed over the years. Customers have higher expectations of service and are insisting on how they should be served by their banks. The growth of crypto-currencies over the years shows the level of interest by customers. Central Banks across the globe are actively reviewing the development and CBN has set up a team to review the developments in the Nigeria. Ultimately, banks would eventually play under a well regulated regime to explore opportunities in areas like payments, trade finance, treasury and security, reporting, etc.

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FG to pursue 59-point strategy in Economic Recovery Growth plan

.To raise oil production to 2.5 mbpd by 2020 •Expand tax base •Privatise selected assets •Present document to creditors by end of February 2017 By Omoh Gabriel THE Federal Government is to pursue implemetation of a 59-point strategy  to achieve the objectives of its Economic Recovery Growth Plan that will be launched in the next few weeks. The document which has been finalised waiting for Federal Executive Council’s endorsement has twelve strategies that have been prioritised based on their importance to the success of the government recovery plan. Those who are working on the document, a copy of which Vanguard sighted, said that the federal government intends to restore crude oil production to budget target of 2.2 million barrel per day and move from there to 2.5 million barrels per day by 2020. The Economic Recovery Growth plan also include privatisation of  some federal government selected assets  to raise the needed funds to implement the plan. market. Those who drew up the plan said that Nigeria  will accelerate non-oil revenue generation through expanding the tax base blocking leakages in tax avoidance and nonpayment. The federal government it was learnt intend”s when the plan comes into force to drastically cut cost and align monetary and fiscal policies. The government also during the plan period, will spend heavily to expand critical infrastructure especially power, roads and rail. Another strategy in the recovery plan is government intention to revamp the four existing refineries to ensure local supply of petroleum products in order to conserve foreign exchange. It is also stated in the document that government intends to expand its social investment and deliver on agricultural transformation. Government in its strategic plan will accelerate the implementation of National Industrial revolution plan using special economic zones and improving on ease of doing business in Nigeria. It  will  also focus on priority sectors in order to create jobs, promote exports, boost growth and upgrade skills. Economic reform proposals The federal government is putting in place the economic blue print in order to meet the conditions needed for it to borrow at least $1 billion from the World Bank to help pull the economy out of recession. It was learnt that the government plans to present the economic reform proposals to the World Bank and other creditors it seeks to borrow from. The government now plans to present its econmic reform proposals by the end of February, according to government officials and Western diplomats who declined to be named as they are not authorised to speak publicly.  One senior government official said Nigeria would seek a loan of $1 billion from the World Bank, while a second senior official said it could seek as much as $2 billion. The Nigerian finance ministry declined to comment on the size of the loan being sought or the timing of the submission of the reform proposals. The World Bank also declined to comment on those matters. A spokeswoman said Nigeria’s economic proposals would be the “basis of which the World Bank will determine with the government the most appropriate lending instrument to support the implementation of the reform plan. It had planned to apply for a World Bank loan last year but the process had ground to a halt because it failed to submit its economic recovery plans by the end of December as initially promised. The African Development Bank (AfDB), meanwhile, is holding back the second, $400 million, tranche of a $1 billion loan because it is also awaiting the reform plans. Nigeria will present its economic proposals to the AfDB at the same time as the World Bank, according to the government officials.

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Banks’ deposits rise by N5.33bn in January

Banks’ deposits rise by N5.33bn in January 

Naira depreciates to N506/$ in parallel market Nigeria’s Eurobond appreciates as investors renew interest Economy: Analysts predict moderate rise in January inflation BANKS’ deposits rose marginally by N5.33 billion in January thus reversing negative trend recorded in December. However, the naira depreciated to its lowest level in the parallel market last week with the exchange rate rising to N506 per dollar in the market. Meanwhile Nigeria’s Eurobond appreciated last week due to upsurge in demand which halted three weeks of decline. Deposits rise by N5.3bn: Banks are mandated to keep 22.5 percent of their total deposit as Cash Reserve Ratio (CRR) with the Central Bank of Nigeria (CBN). Consequently, the apex bank, on a monthly basis, debits banks for 22.5 percent of any increase in bank deposit for the month. However, if banks record decline in deposit, the CBN credits the industry 22.5 percent of that decline in deposit. Financial Vanguard investigations reveal that the CBN debited banks N1.2 billion last week for CRR for January, implying that banks’ deposit rose by N5.3 billion. Parallel market exchange rate The increase however represents 2.5 percent of the N213 billion decline recorded in December. Naira depreciates to N506/$ in parallel market: Despite the steady increase in the nation’s external reserves, which rose further to $28.69 billion last week, the naira depreciated to its lowest level in the parallel market. From N498 per dollar the previous week, the parallel market exchange rate rose to N506 per dollar at the close of business on Friday. Parallel market sources attributed the depreciation to upsurge in demand amidst constrained dollar supply. Though the CBN sells $8,000 dollars to each BDCs per week, market sources however insist that this is not sufficient to moderate demand pressures in the market. According to Managing Director/Chief Executive, H.J Trust BDC, Mr. Harisson Owoh, there is need for CBN to increase dollar sale to BDCs so as to accommodate more demands and moderate the pressure in the parallel market. However, the naira appreciated in the interbank market for spot and forward transactions last week. Data by the Financial Market Dealers Quote (FMDQ) show that the naira appreciated slightly by 0.08 per cent for spot transactions, with the spot exchange rate dropping to N305 per dollar. Also the exchange rates for 1 month, 3 months, 6 months and 12 months contracts fell by 1.51 per cent, 2.2 per cent, 4.2 per cent and 7.67 per cent respectively to N315.34 per dollar, N323.27, N331.53 and N349 per dollar. CBN, DMO to raise N252.4bn: Meanwhile, the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) will this week raise N252.44 billion through treasury bills and FGN bonds sales. Liquidity inflow While the CBN is expected to sell 91-days bills worth N32.436 billion, 182-days bills worth N30 billion and 36- days bills worth N80 billion. The TB sale is meant to mop up liquidity inflow from matured TBs of the same value. The DMO on its part is seeking to raise N110 billion by re-opening the FGN 5-year (2021), 10-year (2024) and 20-year (2036) benchmark bonds. Consequently, and in the absence of any major liquidity inflow, the interbank money market will this week experience scarcity of funds and increase in cost of funds. Nigeria’s Eurobonds appreciate as investors renew interest: Prices of Nigeria’s Eurobond last week rose for the first time following renewed investors interest which triggered upsurge in demand. According to data by the Debt Management Office (DMO), price of the 5-year, 5.13% July 12, 2018 Eurobond rose by $2.68 (the yield fell to 5.4 per cent), while the 10-year, 6.38 per cent July 12, 2023 bond gained $2.68 (yield fell to 6.21 per cent). But the 10-year, 6.75 percent January 28, 2021 lost $0.03. The renewed investor’s interest might have been prompted by the roadshow that preceded the $1 billion Eurobond issued by the FG last week. Prior to issuing the 15 year bond, federal government’s officials including Minister of Finance, Mrs. Kemi Adeosun, Senator Udoma Udo Udoma, the Honorable Minister of Budget and National Planning, Godwin Emefiele, Governor of the Central Bank of Nigeria, Dr. Abraham Nwankwo, the Director-General of the Debt Management Office (DMO) and Mr Ben Akabueze, the Director General of the Budget Office met with foreign investors twice in London and the United States. These interactions resulted into $7.8 billion subscription to the $1 billion bond, implying 800 per cent oversubscription. Analysts predict moderate rise in January inflation: Economic analysts have predicted moderate rise in January inflation figures, scheduled to be released by the National Bureau of Statistics this week. Analysts at Afrinvest Plc predicted that inflation will rise to 18.7 percent from 18.55 percent in December while analysts at Financial Derivatives Company (FDC) predicted 18.6 percent January inflation rate. Percentage decline “We forecast Year-on-Year (Y-o-Y) headline inflation rate to inch higher to 18.7 per cent from 18.6 per cent in December 2016 due to a relatively lower base despite projected slower month-on-month (M-o-M) change to 1.0 per cent from 1.1 per cent in December 2016 as the impact of yuletide season on prices wears off.” said Afrinvest analysts. On their part, FDC analysts said: “The FDC Think Tank estimates a relatively flat movement in the January headline inflation rate to 18.6 per cent from 18.55 per cent in December. Prices have generally either declined or remained flat recently. The percentage decline in 2017 was pale in comparison to 2016, leading to a marginal surge of 0.05 per cent. The food basket especially has been relatively more inelastic than other commodities.” Read more at: http://www.cibnblog.blogspot.com/2017/02/banks-deposits-rise-by-n5-33bn-in-january/

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