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New naira notes crisis threatens banks’ Q1 performance

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Banks’ borrowing from CBN up by 458% to N57.5trn

BY EMEKA EJERE

Hiccups from the implementation of the currency redesign and swap policy by the Central Bank of Nigeria (CBN) may have exposed commercial banks in the country to high processing expenses that may push up their operating cost and propel a drop in their Q1 2023 bottom line.

This is even more likely as some of the security measures being taken by the lenders in the face of customers’ growing agitation have kept their income-generating operations on hold.

Besides, monetary and economic experts say the hardship that the policy has inflicted on Nigerians could lead to a host of negative unintended consequences, which may hit the deposit money banks hard.

According to them, digital banking could emerge from the current cash squeeze crisis as a vampire that could suck dry the traditional deposit money banks.

The naira crisis sparked violent protests in parts of the country, starting from last weekend that continued into the current week as some bank branches and properties including vehicles, Automated Teller Machines(ATMs), among others were vandalised, forcing banks to shut down some of their branches.

While there were reported cases of the Sapon, Abeokuta, Ogun State branch of First Bank and Wema Bank branch in Ibadan, Oyo State, vandalised by irate mob protesting naira scarcity, there were other unreported cases of vandalisation across some bank branches nationwide.

Although banks have deployed more security operatives at their branches at extra cost to secure properties and in some cases shut down operations in some branches, there are indications that the situation may heighten after the deadline elapsed on Friday, thus remaining one week grace period to February 15, after which the old 200, 500 and 1,000 naira notes may cease to be legal tender, unless the Supreme Court ruling further extend the deadline. The Supreme Court had ruled that the deadline of February 20, should not stand, at least, for now.

There has been panic among traditional bankers over the rising popularity of digital and shadow banking (unregulated and non-bank financial intermediator). The fear is even more palpable following the turn of events in the past week, according to industry sources.

While the concerns could be dismissed as panicky, many banks have literally shut out their customers in the past week with their digital payment channels grounded, ATM disabled, and over-the-counter (OTC) operations non-existent. With digital service becoming increasingly erratic, supposed transfers take 48 hours or more in some cases to deliver. Customers with failed transactions are handed 10 working days before their cases could be resolved.

In the aftermath, many banks have drafted more personnel to customer services to attend to impatient customers and put information technology (IT) units on the spot. Experts attribute the current crisis in the banking sector to the mass exit of the IT support staff in the wake of ‘japa’ syndrome.

Feeling their pulse

Meanwhile, mindful of the level of threat the recent events pose to their market shares and profitability, some of the lenders are going out of their ways to put in place some palliative measures to alleviate the suffering of their customers.

While this can be a strategy to retain existing customers, who may be considering switching over to the digital banks as well as woo new customers, it may also contribute to weakening the banks’ balance sheet, at least, in this first quarter.

One of the lenders that have toed this line is Sterling Bank Plc, which said it has waived all personal account transaction fees as part of gesture of solidarity for its customers over the new naira scarcity challenge.

The Chief Executive Officer, Sterling Bank, Abubakar Suleiman, made the announcement in an email to customers which read in part, “We at Sterling recognise the difficult circumstances many of our customers are going through. In light of this, from February 6, 2023, through February 18, 2023, our fund transfer services will be provided free of charge to all personal account customers.

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“In addition, we are glad to inform you that we will provide free debit cards to all interested customers. This will provide you with a convenient and secure way to make purchases and carry out transactions.”

Sterling Bank’s Chief Marketing Officer, Dante Martins, said, “We believe that by eliminating transaction costs for this period, we can assist our customers make their banking experience easier by making the most of our powerful digital solutions.

“We understand that our consumers need choices when it comes to their everyday requirements, and we want to make sure that we can serve them as best as we can during this time.”

Speaking with Business Hallmark, a financial analyst, Dr. Felix Okoro, said it will take extra efforts for the banks to recover from the shocks of the naira redesign crisis so fast that it will not tell on their first quarter results of this year.

“Apart from incurring additional costs that will arise from issues emanating from the adjustment to the currency redesign and swap policy, the banks are also grappling with loss of revenue associated with business interruption,” Okoro said.

He, however, warned that the banks should not fall to the temptation of resorting to unlawful practices, such as unwarranted debiting of customers’ accounts in a bid to cover their losses, saying that may turn out to be counterproductive.

However, findings have revealed that virtually all the bank branches nationwide have one form of insurance coverage or the other with the most prevalent coverage being Fire, Burglary and Theft as well as Business Interruption insurances. But it is not yet ascertained whether or not those coverage have an extension to cover riot or civil commotion.

While banks are currently taking stock of what is happening with the aim of lodging claims through either their insurance brokers or directly to the underwriters, insurers said they are assessing the ongoing situation, praying the destruction does not go beyond what has already happened.

In a reaction seen by Business Hallmark, the Director General, Nigerian Insurers Association(NIA), Mrs. Yetunde Ilori, assured that insurance companies will honour claims obligation arising from the crisis as long as the banks and other victims have the right insurance coverage.

According to her, “provided the banks have an extension on their insurance to cover riot and civil commotion, insurers would pay the claims. I believe the banks must have placed their insurances through credible brokers and insurance companies and if that is the case, there is no cause for alarm.”

Praying for the discontinuation of the ongoing crisis, she did not envisage the claims to amount to the magnitude of the EndSARS claims, where the industry paid about N20 billion in compensation.

Meanwhile, in the light of the indictment of some banks’ Chief Executive Officers (CEOs) by the CBN on the scarcity of the naira notes in circulation, the Association of Corporate Affairs Managers of Banks (ACAMB) has said that banks are not responsible for scarcity of new naira notes.

“ACAMB affirms without any equivocation that banks are not in any way hoarding or holding back naira notes or engaging in any act inimical to our avowed commitment to exciting customer experience’’, the association said.
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The statement read in part, “These measures, among others, include deployment of extra technical supports for online payments, additional security at ATMs to ensure round the clock usage, technological back up to reduce online downtime to the barest minimum, additional staff deployment to counters to attend to cash transactions and timely interbank and inter branch networking to bridge any gap.

“We are confident that these measures, in addition to efforts by the regulatory body, CBN, will result in greater ease of access and cash liquidity. The Federal Government and the CBN have reiterated similar readiness to address any constraint in the cyclical flow, including making adjustments, where necessary.’’

Cash shortage exposes e-payment channels’ weakness – ICAN

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The Institute of Chartered Accountants of Nigeria (ICAN) has said that the cash-in-hand challenge has revealed the weakness in the country’s alternative financial payment system.

The institute advised banks, fintechs and telecommunication companies to ramp up investment in their alternative and digital payment platforms.

ICAN made this known at the weekend while reacting to the crisis  caused by the cash crunch caused by the  new naira note policy recently introduced by the Central Bank of Nigeria (CBN).

“The current cash-in-hand challenge has revealed the weaknesses in our alternative financial payment solutions. Accordingly, we encourage the deposit money banks, telecommunication and fintech companies to ramp up investments in their systems and processes towards improving the quality of their services in the Nigerian economy in the shortest possible time”.

ICAN explained that the glaring effects of the policy on businesses and other financial transactions had further been compounded by the challenges in fuel supply across the nation.

“You will recall that ICAN, in pursuit of its public interest mandate, published its position paper on the naira redesign policy in December 2022 and proffered some recommendations for its successful implementation”, the institute said.

The institute reiterated its commitment to “engaging the government and other key stakeholders to promptly resolve the crisis.

“In the meantime, we passionately appeal to the public to consider the present situation a passing phase in our journey towards national prosperity”, the institute advised.

 

Govt mulls logistics routes for trucks, articulated vehicles

The Lagos State government has said it is considering creating logistic routes for trucks and articulated vehicles as specified in the state transport master plan.

The state Commissioner for Transportation, Dr. Frederic Oladeinde, who revealed this at a stakeholders’ engagement, noted that to curb incessant truck accidents within the state, there was a need to chart robust strategies that will checkmate frequent truck accidents.

He stressed that a combination of different policies, which include erecting truck barriers, compliance with minimum safety standards and restricting the movement of articulated vehicles to designated routes will go a long way in curbing truck accidents in Lagos.

Explaining the proposed logistic routes for trucks and articulated vehicles, the Permanent Secretary, Ministry of Transportation, Abdulhafiz Toriola, noted that the state government is considering implementing the use of designated routes for articulated vehicles as one of the strategies to checkmate the operations and activities of trucks plying the state’s roads.

Emphasising that the safety and security of Lagosians remain paramount to the present administration, Toriola said that the state government does not want to take unilateral decisions, hence the need for the stakeholders’ engagement with relevant unions before taking necessary steps.

The permanent secretary disclosed that the ministry is reviewing the minimum safety standard procedure for trucks and articulated vehicles being implemented by the Nigerian Port Authority (NPA) with a view to modifying it by including the Vehicle Inspection Service (VIS) and Federal Road Safety Corps (FRSC) officials in the inspection process.

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The Special Adviser to the Governor on Transportation, Sola Giwa, said that the stakeholders’ meeting was very germane because of the precious lives that were being lost daily due to negligence on the part of drivers and truck owners, saying as a responsive and proactive government, it will no longer condone unabated truck accidents resulting in the killing of innocent citizens.

A representative of the Council of Maritime Transport Union and Association, (COMTUA), Adeyinka Aroyewun, called for genuineness and clarity of purpose by both parties in achieving the desired results.

Also, Chief Remi Ogungbemi of the Association of Maritime Truck Owners (AMATO), urged the state government to checkmate the activities of touts better known as area boys’ who have become a threat to the lives of its members.
Stanbic IBTC boosts pension experience with new centre

Stanbic IBTC Pension Managers Limited has restated its commitment towards a glorious retirement period for its clientele with a new state-of-the-art Customer Experience Centre, established in the Opebi area of Ikeja, Lagos.

The Chief Executive Officer of the company, Olumide Oyetan, who spoke at the official commissioning of the facility in Lagos at the weekend, assured that the company would continue to surpass the expectations of its clients by providing quality services with the latest technology in a more comfortable manner.

He said that the development was aimed at closing the gap in pension adoption and education, adding that the new centre confirmed its dedication to excellent service delivery to support its clients and help to meet their diverse pension needs.

“We have maintained our position as the largest Pension Fund Administrator (PFA) in Nigeria based on Assets under Management (AuM) and customer count.

“I must say that our hard work and dedication to excellence have been integral to our success thus far, and we are confident of more achievements in the future.

“Our personalised solutions assist clients to navigate the intricacies of pension administration and management.

“And we will continue to grow and expand our business by building stronger relationships with our clients and making a sustainable positive impact in the communities in which we operate”, Oyetan stated.

The Director-General, National Pension Commission (PenCom), Aisha Dahir-Umar, commended the company for spreading its network to enable more Nigerians to benefit from the pension experience.

Dahir-Umar, represented by the Deputy Director, Shola Adeseun, said that the facility was a manifestation of the commission’s policy on the establishment of more branches across the country.

According to him, the commission is optimistic that with the industry’s best practices being entrenched, pension beneficiaries would enjoy quality service delivery at the new branch.

The Director-General, Lagos State Pension Commission (LASPEC), Babalola Obilana, represented by the Head of Department, Finance and Investment,  Adewale Soetan, said that the edifice was in line with the Lagos State government’s agenda to ensure that customers are satisfied at all times.

The Executive Director, Business Development, Stanbic IBTC Pension, Mrs. Nike Bajomo, disclosed that the company plans to introduce more offices and upgrade many existing ones to make its clients happier.

“We expect to do better, grow bigger and make our clients happier this year. We are going to open more experience centres. We are very proud of this place.

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“We have another one at Adetokunbo Ademola and we have also renovated our Port Harcourt office.  We are going to be doing a lot of revamping and lifting our offices to higher standards. As we speak, we have 39 pension locations across Nigeria and we are really proud of it”, she said.

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