Banking

Non-performing Loans

Two Nigerian banks have taken drastic actions against indebted Electricity distribution companies to recover their debts.

Fidelity Bank and Afreximbank took over the collateralised shares of Kano, Benin and Kaduna electricity distribution companies (DisCos) in a bid to take over their boards over their inability to repay loans obtained to acquire assets during the 2013 privatisation scheme.

This action was necessitated by the desire to recover the tied-down capital; reduce the large non-performing loans on their financial statements, and ease cash flow.

Private sector Financing

Access Bank struck a partnership deal to the tune of $280 million with the United States International
Development Finance Corporation on the provision of finance for SMEs in Nigeria.

The deal is expected to boost Small and Medium-scale Enterprises’ financing in Nigeria, and it signifies the United States’ support for private sector-led development in Nigeria and in West Africa.

In a different medium of private sector financing, Rand Merchant Bank Nigeria partnered with Dangote Industries Limited to facilitate a corporate bond issuance in the Nigerian capital markets in the month of July.

The N187.58bn Series 1 issuance was aimed at part-financing the completion of the Dangote Petroleum Refinery Project, a key infrastructure project for Nigeria and West Africa, which is currently scheduled to commence operations in the first half of 2023.

Financial Inclusion

In line with the aim of CBN to promote financial inclusion in Nigeria by licensing payments systems to reach underbanked/unbanked areas of the country with financial services;

First Bank of Nigeria’s agent banking network, Firstmonie Agents, has processed transaction volume in excess of one billion, amounting to over N22tn.

The agent bank has been successful in reaching marginalized areas of the country through its digital and flexible platform.

With over 180,000 Firstmonie agents, the bank has been able to provide services ranging from account opening, cash deposit, airtime purchase, bills payment, withdrawals and money transfer to Nigerians in rural areas.

Pensions

In another move to bridge the marginalisation gap in financial services, FCMB Pensions collaborated with Awabah Nigeria to accelerate the integration of informal sector workers into the pension services.

According to the Nigeria Bureau of Statistics (NBS), about 80% of Nigerian workers operate in the informal sector contributing about 48% of the national GDP.

Awabah focuses on influencing the participation of Associations and Unions to grow Micro Pension Retirement Savings Accounts (RSAs) by providing support, guidance, and adequate information, and also providing ease of registration of customers.

This move is expected to boost the supply of investible funds in the capital market through pension funds.

Competition

In fighting against competition from fintech companies; banks have begun to transition from traditional banking methods; and are rapidly adopting and developing digital products and platforms to hedge against the gaps that fintech companies capitalize on in traditional banking.

Microfinance banks are not left behind in this strategy; as PatrickGold Micro Finance Bank, launched a digital banking platform, GetriPay, to promote the ease of financial transactions for its customers.

The platform is expected to boost and ease fund transfer, bills payment, loan accessibility, savings and transaction rewards.

Q2 Performance

Banks who have recently released their half-year financial statements have reported a significant growth in their returns and profitability between H1 2021 and H1 2011; to further strengthen investors’ confidence in the sector.

The six commercial banks that have released their half-year statements are ECOBANK, FCMB STERLING BANK, UNITY BANK, FIRST BANK HOLDINGS and WEMA BANK.

All the banks with exception of First Bank Holding Company experienced significant growth in gross earnings over the period. They recorded growth in Profit after tax to the tune of 23.6%, 80.8%, 40.8%, 22.9%, 7.52%, 22% and 42% respectively.

INSURANCE

Opportunities

A new opportunity has emerged within the Nigerian economy for the Insurance service sector. This is the case of rising insecurity and the need for businesses and individuals to hedge against emerging risks. Recently, some companies, particularly multinationals in Nigeria, have begun taking up kidnapping insurance covers for their top executives.

Several insurance companies have confirmed the existence of kidnap policy in the Nigeria insurance market and its growing popularity due to the recent insecurity crisis in the country. The policy is available at various levels of complexity depending on the underwriter offering the product.

However, it is often treated with utmost confidentiality to prevent arranged kidnap or promotion of kidnapping business within the country. It is expected that this would boost insurance companies’ patronage and revenue in the coming quarter and beyond.

Regulatory bodies in the insurance sector promote local patronage of Insurance Business

The Nigerian Content Development and Monitoring Board (NCDMB) and the National Insurance Commission (NAICOM) have begun moves to ensure the patronage of the indigenous insurance companies by the oil and gas industry with the presentation of insurance services guidelines to stakeholders in the sector to retain the funds that could have been spent in foreign countries in the Nigerian economy.

NCDMB says all insurable risks should go through a Nigerian registered insurance broker. The NCDMB boss also says that the provisions of sections 49 and 50 of the NOGICD Act require all operators engaged in any form of activity in the sector to insure all insurable risks related to their business with an insurance company, through an insurance broker registered in Nigeria.

This is to ensure that a greater portion of the spending in the insurance industry, as it relates to oil and gas activities in Nigeria, is retained in-country

Market performance

Insurance companies quoted on the Nigerian Exchange Limited recorded growth in gross premium in the first and second quarter of 2022 compared to last year.

Ten top insurance firms in Nigeria are targeting to achieve N250.479 billion gross written premium (GWP) for the third quarter ending September 2022.

According to data from the Nigerian Exchange Limited, the companies’ forecast Profit and Loss Accounts Information for the Q3 earnings, also showed that the firms are projecting to achieve N19.727 billion for profit after tax during the quarter.

It is expected that emerging opportunities and moves by the regulatory authority to increase patronage of local insurance service companies will help the sector to perform better in the coming months.

Outlook for Next Month August 2022

We expect activities to pick up positively in the financial service sector. Banks have shown a significant level of resilience and ability to stay afloat in spite of macroeconomic challenges; as they enter into more partnerships and expand into international markets to hedge against risks domiciliary in the Nigerian clime.

We expect their deposits and interest income to continue to grow. We equally expect growth in profit in the coming months.

For insurance companies, we believe the emerging opportunities in the sector and regulatory bodies’ determination to work to support the industry will contribute to greater financial performance in the industry henceforth