Connect with us

Business

Stress Test: Zenith, Larger Banks More Resilient – Fitch Reports

Published

on

The Central Bank of Nigeria (CBN) has singled out Zenith Bank Plc for its strength in comparison to other banks. This development comes after the CBN conducted the stress test which confirmed the resilience of large banks to withstand stresses over smaller banks.

Citing a Financial Stability Report for December 2016, published recently, a rating agency, Fitch, said in its review of the regulatory test highlighted disparities in capital strength in the Nigerian banking industry. The apex bank’s test showed that 3 big banks failed, with their capital adequacy ratio haven significantly fallen below the regulatory requirement.

The apex bank’s test showed that 3 big banks failed, with their capital adequacy ratio haven significantly fallen below the regulatory requirement.

The rating agency said in its analysis of the CBN report: “… medium and large banks collectively could withstand a 100% increase in non-performing loans (NPLs) but small banks (assets less than NGN500 billion) would struggle to withstand even modest NPL deterioration.

“In our own assessment of the banks we rate, which are mostly large with assets more than NGN1 trillion, the capacity to absorb losses through capital varies considerably.

Loading...

“Zenith Bank Plc is stronger than the rest, while capital weaknesses at First Bank National and Diamond Bank have a significant influence on their ratings,” it added.

“All Nigerian bank ratings are in the highly speculative ‘B’ range, but even so capitalization is an important differentiator.”

“The scores we assign, based on capitalization and leverage metrics across the sector, are low, but vary considerably,” the agency explained.

The apex bank’s stress test focused on the ability of banks’ capital adequacy ratios to withstand a number of impairments arising from Non-Performing Loans and Fitch noted in its analysis that small banks were particularly badly hit in the stress tests.

“They already had very weak starting capital positions, with an average capital adequacy ratio (CAR) of just 3.14% at end-2016, following sharp falls in 2016 due to rises in NPLs. Medium and large banks had stronger starting positions, with CARs of 12.75% and 15.47%, respectively, at end-2016,” the agency stated.

The agency also stated: “CBN figures show that NPLs represented 14% of total sector loans at end-2016, a very sharp increase on 5.3% at end-2015. Unreserved NPLs represented a high 38.4% of total end-2016 regulatory capital (end-2015: 5.9%), signaling considerable weakening in the overall capital position of Nigeria’s banking sector.

“Reported NPL ratios do not tell the whole asset quality story. Restructuring, particularly of loans extended to the troubled upstream oil sector, is fairly common practice in Nigeria, and restructured loans at some rated banks account for as much as 20% of total loans,” it added.

It further noted that there was good ground to believe that that capital buffers at banks may be weaker than reported ratios suggest.

The banks, the agency noted, remain profitable, with results boosted by wide margins and currency revaluation gains, large in some cases.

“These are one-off gains but they have been realized and provide a strong boost to capital, which is positive, especially in light of weak asset quality,” it said.

The CAR is the ratio of bank’s assets to its risks. It is placed at 10 per cent for national banks and 15 percent for banks with international subsidiaries and 16 per cent for Systematically Important Banks (SIBs).

 

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Dangote Refinery Will Save Nigeria Over $10bn ― Finance Minister

Published

on

Zainab Ahmed

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed expressed the eagerness of President Muhammadu Buhari administration for the Dangote Refinery to commence operation, says it will not only save the country over $10 billion spend on crude importation but also create jobs.

Speaking while been conducted round the ongoing Dangote Petroleum Refinery, Petrochemical complex, fertilizer plant and Subsea gas pipeline projects, Zainab said that the government will continue to provide enabling environment to grow local business and attract investors.

“We are very confident that once Dangote refinery commences operation it will save us over $10 billion Nigeria spent on importing crude oil and also help to build local capacity and create jobs. The money we save will help to strengthen our macroeconomy which will, in turn, encourage investors to come in.

The Minister who also inspect the ongoing Apapa-Oshodi-Ojota-Oworonshoki Expressway, however, assured Dangote group of the Federal government support in ensure the reality of the project,

“We are going to be providing some intervention in area of duty and some tax waver which is available to every organization in that sector and part of my visit is to see the benefit of incentive we have been providing.

Loading...

On his part, President of Dangote Group, Aliko Dangote said that on completion of the refinery project next year, they intend to grow the company revenue from $4 billion to $30 billion while creating massive employment opportunity.

“By the time we finished this refinery and other projects, for us as a company we are going to record a major change, we are looking at moving from $4 billion revenue to $30 billion revenue. That will strengthen us to invest more money in our domestic economy.

“We don’t want Nigeria to be an import base economy but rather export base economy. We have tried that in cement and it has really work in the sense that we are looking at exporting almost $400million to $500 million worth of cement in the next one to two years.

Aliko explained that due to inability of local construction companies to handle some of the aspects of the ongoing project, they were left with no other option than to procure some of the equipment, “we have to buy some of the equipment we use for construction as they were not readily available within the country. After this refinery project, with the kind of modern and sophisticated equipment at our disposal we may move into the construction industry.

Speaking on the capacity of the refinery, Aliko said that it will be the single largest train petroleum refinery in the world with 650,000 barrels per day with 838 KTPA polypropylene plant, “largest sub-sea pipeline infrastructure in any country in the world with 1,1pp km to handle 3 billion SCF of gas per day.

“Our refinery can meet 100 per cent of the Nigerian requirement of all liquid products such as gasoline, diesel, kerosene and aviation jet. It will also have a surplus of each of these products for export.

He disclosed that after completion of all the projects it will have capacity to generate over 280, 000 direct and indirect jobs.

Continue Reading

Business

5 Mistakes To Avoid When Starting A New Business

Published

on

Starting a business is not an easy task and being in a position to run it successfully can become a challenge if you do not have a plan or goals.

Failing to find a better way to get the best out of your new business can trigger you to make poor decisions which in turn can lead to being a business setback.

To put yourself at a better place for a successful business, avoid making these mistakes;

1. SETTING UP YOUR BUSINESS WITHOUT A PLAN

Before starting you new business, it is good to go through the planning phase so that you have a rough idea of what the business will entail as well as the market for your goods or services.

Loading...

2. FAILING TO HAVE SPECIFIC GOALS

Setting smart goals before starting your business helps you to remain on the track as you go about your daily activities.

3. INADEQUATE FINANCES

It is worth noting that money is one of the main causes of business failure. Ensure that you have adequate finances for your new business so that you can comfortably run it, otherwise, it will fail in no time.

4. DOING IT ALL BY YOURSELF

For your business to succeed, it is good that you seek advice or support from your friends or other business owners and learn about different tricks to succeed in your place of expertise.

5. IGNORANCE OF MARKETING

Before settling on a business idea, take note of the marketing strategy you will employ as this will greatly affect your business progress and success.

Continue Reading

Business

Adesina Wins African Of The Year Award

Published

on

Adesina

African Development Bank President Dr Akinwumi Adesina received the African of the Year Award from the All Africa Business Leaders Awards (AABLA™), Thursday night, in recognition of his bold leadership and the innovation of the Africa Investment Forum which “opened up billions of dollars of investment into the continent.”

The ninth edition of the awards, organized by AABLA™ in conjunction with CNBC Africa, seeks to honour leaders who have contributed and shaped the African economy.

The Africa Investment Forum (https://AfricaInvestmentForum.com/), inaugurated in 2018, has been a trailblazer in tilting investments into the continent. The second edition of the Forum which was held in Johannesburg, South Africa ended on 13 November. It was attended by over 2,000 delegates and secured investor interest worth $40.1 billion – up from $37.1 billion the previous year.

“It is indeed a great honour,” Dr Adesina said in remarks during the exclusive gala dinner held at the Sandton Convention Centre in Johannesburg, at which the awards were announced. Adesina added that he was overwhelmed to follow in the footsteps of his “big brother” President Paul Kagame of Rwanda, who won the award in 2018. “My heartbeat is to serve the people of Africa,” Adesina said.

The event was attended by an A-list of business leaders, government representatives including David Makhura, Premier of Guateng Province, who gave the opening address. The event also attracted some of South Africa’s leading personalities. Vibrant music was provided by The Muses, a south African all-female string quartet and “Dr Victor And The Rasta Rebels.”

Loading...

The awards are decided by a jury of continent-wide judges led by Sam Bhembe, CNBC Africa Non-Executive Director, following evaluation of a shortlist of finalists to determine the overall category winners.

Bhembe said the award reflected how the winner would “shape the future of the African continent,” and that the winner would brace the cover of a special edition of Forbes Africa.

In other categories of the 2019 awards, Nigerian Co-Founder of Kobo360, Obi Ozor won Young Business Leader of the Year; Naspers CEO: South Africa, Phuthi Mahanyele-Dabengwa took the Business Woman of the Year award; while Nedbank, won the Company of the Year award.

Adesina dedicated his award “to the people of Africa who inspire me… I do not work alone.” He also said it was very rewarding to be at the helm “of an organisation that paves the way to progress.” Enditem

SOURCE: African Development Bank Group (AfDB)

Continue Reading
Advertisement