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Recapitalisation: Banks sweat over exclusion of N3.8trn retained profit

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Recapitalisation: Banks sweat over exclusion of N3.8trn retained profit

As bankers begin from tomorrow to strategise on how to meet the new capital structure prescribed by the Central Bank of Nigeria, CBN, on the eve of the Easter holiday, feelers from stakeholders in the nation’s financial sector point to huge discomfort with certain provisions of the new policy.

Financial Vanguard findings show that the policy effectively excluded banks’ retained earnings, amounting to about N3.85 trillion, from the composition of minimum capital requirements. Consequently, this has generated controversy among banking and investment analysts.

While announcing the new minimum requirement for banks, the CBN in a statement, last Thursday, said, “The minimum capital shall comprise paid-up capital and share premium only”, thus excluding retained income (earnins) and other components of banks’ shareholders funds and making it difficult for most banks to meet the requirment.

While the Paid-up capital is the nominal value of shares issued by bank (mostly pegged at 5 kobo per share) and paid for by shareholders, the Share Premium is the difference between what the shareholders paid for each share and the nominal value of each share.

However, the retained income of banks is profit which was not distributed to shareholders. Vanguard findings show that the top five banks and bank holding companies, have retained incomes of N3.39 trillion, which represents 88 per cent of the combined retained income of the top ten banks. Based on their latest financial statements, the retained income of the top banks are: Zenith Bank with N893.9 billion; UBA, N750 billion; Access Corporation, parent company of Access Bank, N715.13 billion; and FBN Holdings, parent company of FirstBank, N608 billion. If the new policy had not excluded retained earnings, these four banks would have been sitting comfortably above the policy threshold, while GTHoldco, the parent company of GTBank, at N424 billion, would also be on the verge of meeting the threshold. Other banks with significantly high retained earnings are Union Bank, N147.88 billion; Fidelity Bank, N115.8 billion; and FCMB Group, owners of First City Monument Bank with N110.1 billion. Faulting the decision of the CBN to exclude the huge retained income of banks from the minimum capital requirements, a Chartered Accountant and the Managing Partner of Ecovs OUC Nigeria, Andrew Uviase, said: “I don’t think it is fair because if someone have money and he is not using it, then why will you prevent the person from using it, the retained earnings to meet arising obligation?. It is not fair.

“Except it is any other reserve that is not born out of trading activities like if you are talking about revaluation reserves or any other artificial reserve. But if it is retained earnings that somebody earned, would the banks have been better off spending that money and bringing it back. Because you have the right to capitalise retained earnings by issuing bonus shares, you can use it for so many things. “If the banks feel so strongly about it, they should pay out the retained earnings and reinvest it. ‘’You pay out the dividend with the understanding among the major shareholders that if you get this money you are going to reinvest it. You deplete your retained earnings and enhance your capital.” Making the same suggestion, investment banker and a stockbroker, Tajudeen Olayinka, said: “ We still have to await further clarifications on this issue. Except it is completely forbidden by the circular or by any other directive of CBN, a bank can still follow the route of issuing stock dividend at market to pay for rights from its current earnings. “This settles the CBN’s focus on paid-up and share premium conditions.

The company maintains its current valuation but would have its earnings diluted, as more shares are now issued against current valuation. “However, a combination of stock dividend and share reconstruction could settle the potential earnings dilution if done simultaneously. Now, if CBN says no to this route, it follows therefore, that the intention is more economic than a mere fresh capital raising.

In line with Basel III
However, a former Director, Trade and Exchange Department, CBN, said the exclusion of the banks’ retained income from the minimum capital requirement is in line with global best practices based on the requirement of the Basel III international standard for banking regulation.

The former director also averred that the CBN should not allow banks use their retained income in any way to comply with the new minimum capital requirement stressing this will compromise the recapitalisation exercise. Speaking anonymously to Financial Vanguard, the CBN former director highlighted major reasons for the exclusion of retained incomes. “The first is for risk assessment. The CBN aims to ensure that banks have a robust capital base to absorb potential losses and avoid systemic shocks. “By excluding retained earnings, which can be volatile due to business cycles and other factors (such as profits that may arise from Exchange Rate Gains and can also be affected greatly by exchange losses), the focus remains on more stable core capital components, which are Paid up Capital and Share Premium. ‘’The second reason is to ensure quality of banks’ capital. “Retained earnings represent accumulated profits over time.

However, their quality may vary. Some retained earnings might be tied to risky assets or speculative ventures or volatile exchange gains. ‘’By excluding them, the CBN emphasizes higherquality capital components and ensures a level playing field for all banks. ‘’Furthermore, the Core Capital can also more easily be compared to those of foreign banks. “Another reason is for transparency and comparability. Excluding retained earnings simplifies capital calculations and enhances transparency. It ensures consistency across banks and facilitates meaningful comparisons. “Finally is the need for the CBN to align with Basel III standards. The CBN’s guidelines align with international standards (Basel III). These standards emphasize core capital elements (such as paid-up capital and share premium) to enhance financial stability. ‘’Hence the minimum capital base for banks operating in Nigeria will now be Paid-up capital plus share premium.” Also taking side with the decision of the CBN to exclude banks’ retained income, a Communications/ Economy analyst, Clifford Egbomeade stressing that the decision of the CBN will ensure a more accurate assessment of banks’ financial positions. He said: “With the separation of the new capital base from shareholders’ funds and focusing solely on share capital and share premium, the CBN aims to streamline financial reporting and ensure a more accurate assessment of banks’ financial positions.”

Recapitalisation positive for economy
Meanwhile, investment analysts have said the banking recapitalisation will impact positively on the economy, especially in terms of enhancing foreign investment into the country, boosting Naira appreciation, while also prompting mergers and acquisition as well as attracting more pension funds into equity investment. Nnamdi Nwizu, Co- Founder of Commercio Partners, an investment bank, said: “It looks like the whole idea is to ensure fresh capital injection. I think the economy is well positioned to fund the needs. It’s time we see the Pension Funds allocate more capital to equities. We also expect to see a lot of foreign portfolio investors, FPI’s coming to invest in the banks.

“I expect to see M&As, either the smaller banks coming together or bigger banks acquiring those smaller ones. It is almost inevitable.” Also projecting increased foreign investment, Group Head, Global Markets at Parthian Partners, Ronke Akinyemi, said: “The new bank recapitalization requirements by the CBN is a step in the right direction as it will eventually result in a more robust financial system. “Though steep, we believe the time frame given will allow room for the current banks to meet the requirements before the deadline. “Ultimately, we envision that this new recapitalization requirement will result in increased foreign direct investments which will in turn help to stabilize the naira. “Thus, we expect to see rounds of capital raises, especially, with the restrictions of the capital requirement to share capital and share premium. “In addition, we envisage that there will be mergers between tier 1&2 banks and also among tier 2 banks to meet these new requirements.” In the same vein, the immediate past President Chartered Institute of Stockbrokers, CIS, Olatunde Amolegbe, said , “As it were limiting it to just share capital and share premium means most of the tier 1 and 2 banks will be short of minimum capital requirements by an average of 45% and will need to raise fresh capital or downgrade to lower licensing levels. An estimate says that if all the banks were to meet the requirements then they will need to raise an aggregate of about N2t within the next two years.

”While I believe our market has the capacity to provide this capital whether some of the banks on a standalone basis makes sound investments is a different matter entirely. I suspect we are likely to see some mergers amongst the tier 3 banks particularly.” Emphasizing the need for the banks sto start shopping for foreign investors with deep pockets, Uviase, Managing Partner of Ecovis OUC in his recommendations to the banks, said: “There is a time frame for meeting the new minimum share capital. It is not overnight. You have to start the process now, start early enough. “You can start looking for investors, you can start looking for people who will do business with you and have the same thinking with you.

“The immediate thing is you have to enhance the ownership structure, so that it is no longer owned by one or two persons. “You have to also look for international investors, people who have the deep pocket to bring in foreign currency so that when you convert, you will have enough money. “And then they also have to begin to look at how they can enhance their public image and investors’ confidence so that people can be willing to invest. “And then they also have the option of the ones who can stand on their own to come together. That will trigger another round of mergers and acquisition among the small banks.’’

Source: Vanguard news

 

Aviation

DANA Incident :Tukur warns against stripping NCAA’s autonomy

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The Nigerian Government has suspended the operations of Dana Air. The order followed an incident involving a Dana Air plane at Lagos airport

Former Assistant General Secretary of Airline Operators of Nigeria (AON), Alhaji Mohammed Tukur
has warned against the danger of undermining the autonomy of the Nigeria Civil Aviation Authority, (NCAA).

Alhaji Tukur in a statement described the the grounding of all the fleet of the DANA by the Minister of Aviation and Aerospace, Barrister Festus Keyamo as a usurpation of the powers of the NCAA.

“The action of the Minister is like putting our civil aviation on a reverse to the era between the late eighties and the early time of the present democratic dispensation when President Obasanjo for no just course ordered the grounding of the entire Chanchangi fleet over Bellview crash.”

He noted that the development was a dangerous signal that must be repealed so that the civil aviation authority would not be relegated to an appendage of the Ministry.

The former AON scribe further described the grounding of DANA, an airline that just scaled through the economic audit of the NCAA as unfortunate stressing that it was also happening at the wake of the authority’s successful safety audit and FAA’s category one.

“It’s ironic for Keyamo who recently complained of high insurance rates and leasing costs faced by the Nigerian operators to come up with such hammer on DANA which gives an impression that our CAA lacks independence and oversight capability”.

Alhaji Tukur further observed that there was likely an aqua plain on the runway because of the rain saying that it was necessary to have waited for the investigators to come up with the plenary report while only the aircraft involved should have been grounded.

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 ‘Multichoice, a scam’ – Nigerians react to new prices for DStv, GOtv

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There has been growing concerns among Nigerians over the recent increase in subscription fees for Multichoice products, specifically

There has been growing concerns among Nigerians over the recent increase in subscription fees for Multichoice products, specifically Gotv and Dstv. Many Nigerians have expressed their dissatisfaction with the company’s decision to raise prices annually, claiming that it is becoming excessive and burdensome for consumers.

Multichoice on Wednesday jacked up the prices of its offerings in Nigeria four months after its last increment. The company reviewed prices in its packages across the board. The new prices will take effect from May 1, 2024.

With the latest price hike, the DStv Premium package increased from N29,500 to N37,000. Similarly, the DStv Compact+ went up from N19,800 to N25,000 while the Compact package increased from N12,500 to N15,700.

The Comfam package moved from N7,400 to N9,300. Yanga package moved up from 4,200 to N5,100 while Padi package increased from N2,950 to N3,600. HDPVR was increased from N4,000 to N5,000, the Access Fees package from N4,000 to N5,000, and XtraView moved from N4,000 to N5,000.

Meanwhile, the Gotv Supa+ package moved from N12,500 to N15,700, Supa package from N7,600 to N9,600, and Max package from N5,700 to N7,200.

While the Jolli package was jacked up from N3,950 to N4,850, the Jinja package moved from N2,700 to N3,300, and Smallie package from N1,300 to N1,575.

The company implemented an upward review of prices in December 2023, days after announcing a $72m loss in its financial statement for the third quarter of the year.

Checks on the company’s reviewed price list then showed a 20 per cent per cent hike in the company’s packages across the board.

In April 2023, the broadcasting company also announced an upward review of prices on its DStv and GOtv packages by 17 per cent.

This was confirmed in a text message sent to customers that the new rates will take effect on May 1, 2023.

The pay-tv firm said the price adjustment was due to the rising costs of business operations.

“Please note that from May 1, your monthly subscription (premium) will be N24,500. To retain your old price of N21,000 for up to 12 months ensure you are active by April 30,” the text message reads.

Also, in March 22, MultiChoice increased the prices of its DStv and GOtv packages.

Announcing the increase in a statement, the company said the rising costs of inflation and business operations led to the increment in the prices of the packages.

As a result, there have been calls for the government, represented by the National Assembly leaders, to intervene and possibly even ban the usage of Multichoice products in the country.

The rationale behind this move is to safeguard the interests of Nigerian consumers who are grappling with the escalating cost of living in the country. The situation has led to heightened tensions between the company and its customers, with many calling for a more equitable and transparent pricing model.

Businesses need to respond to the concerns of their customers, particularly in a highly competitive market such as the media and entertainment industry. Multichoice’s current pricing policy has been met with significant resistance from Nigerian consumers, and the company must take proactive steps to address these concerns. Failure to do so may result in a loss of customer loyalty, decreased revenue, and reputational damage.

The PAPERS speaks with some consumers about the latest Multichoice products prices.

A civil engineer, Mr. Albert Ihedioha said: “It is not their fault; our government gave them the audacity to be scamming us deliberately. The government is not doing enough to protect the citizen of this country from scamming company like Multichoice. What stops this company from operating pay-as-you-go?  As for me, I have stopped using my DStv, I will look into anther cable for cheaper rate, enough is enough for DStv.

Another consumer, Mr. Kazzem Olaonipekun who operates lounge business also speaks against the hike and called it ‘scam’.

“This is not acceptable, I want call on the government to checkmate this South African company, we can’t accept this. This is like a daylight robbery and scam, imagine the inflation, look at the price and how they have been consistently doing it for three years. These are the people running down our economy, president Tinubu must intervene to this act with urgency.”

Speaking in the same vein, Mrs. Nkechi Sinat, a bar owner in Owerri said it is over to the Nigeria government to call Multichoice to order.

She said: “The truth of the matter is that those who are supposed to checkmate them have taken bribes, and that is why they feel they can do anyhow in our own country. Can we go to South Africa to do such? The kind of leverages they have here, can we have it there? As for me and my family, no more GOtv or DStv, and I want to confirm to you that I am selling off my dish once the current subscription expires next week.”

Mr. Michael Ighodalo from Belgium questions the manner at which some companies operate in Nigeria which is different from the way they operate in their own countries.

Hear him: “In a democratic country like Nigeria, such nonsense should stop. I think the Senate needs to look into this, especially this time when people are facing hardship, Multichoice is not reasonable at all. Is that the way they behave in their own country? I am calling on every Nigerian to stand up and say NO to MULTICHOICE and its products. They should stop the extortion. We have other products in the country why can’t we patronize them and dump these Multichoice products?”

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NGX: Investors lose N673bn in five hours

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Investors in the Nigerian equities market endured another bearish session on Wednesday as they lost N673 billion at the end of trading.

Investors in the Nigerian equities market endured another bearish session on Wednesday as they lost N673 billion at the end of trading.

This followed the dip in the share value of MTNN, Transcorp Hotel, Oando and FBNH on the trading floor today.

After five hours of trading at the capital market, the equity capitalization decreased to N55.4 trillion from N56.1 trillion posted by the bourse on Tuesday.

Similarly, the All-Share Index (ASI) decreased to 98,121.30 from 99,311.54 achieved by the bourse the previous day.

The market breadth was positive as 20 stocks advanced, 19 declined, while 78 others remained unchanged in 7,907 deals.

Sunu Assurances Nigeria, Neimeth International Pharmaceutical, and The Initiate led other gainers with 10% growth each in share price to close at N1.21, N1.98, and N1.98 from their previous price of N1.10, N1.80, and N1.80 per share.

UPDC, CAP, and McNichol also increased their share prices by 9.90%, 9.90%, and 9.57% respectively.

On the flip side, MTN Nigeria Communications and Transcorp Hotels led other price decliners as they shed 10% each off their share prices to close at N201.60 and N87.93 from their previous N224.00 and N97.70 per share.

Oando, First Bank of Nigeria Holdings (FBNH), and Fidson Healthcare equally shed their share prices by 9.90%, 9.82%, and 9.75% respectively.

On the volume index, Guaranty Trust Holding Company traded 81.407 million shares valued at N2.9 billion in 444 deals followed by Zenith Bank which traded 46.156 million shares worth N1.69 billion in 650 deals.

United Bank for Africa (UBA) traded 41.600 million shares valued at N953.5 million in 717 deals.

On the value index, GTCO recorded the highest value for the day trading stocks worth N2.93 billion in 444 deals followed by Zenith Bank which traded equities worth N1.69 billion in 650 deals.

UBA traded stocks worth N953 million in 717 deals.

Source: RipplesNigeria

 

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FULL LIST: Multichoice hikes DStv, GOtv prices

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Broadcasting company Multichoice has jacked up the prices of its offerings in Nigeria four months after its last increment.

Broadcasting company Multichoice has jacked up the prices of its offerings in Nigeria four months after its last increment.

The company reviewed prices in its packages across the board. The new prices will take effect from May 1, 2024.

With the latest price hike, the DStv Premium package increased from N29,500 to N37,000. Similarly, the DStv Compact+ went up from N19,800 to N25,000 while the Compact package increased from N12,500 to N15,700.

The Comfam package moved from N7,400 to N9,300. Yanga package moved up from 4,200 to N5,100 while Padi package increased from N2,950 to N3,600. HDPVR was increased from N4,000 to N5,000, the Access Fees package from N4,000 to N5,000, and XtraView moved from N4,000 to N5,000.

Meanwhile, the Gotv Supa+ package moved from N12,500 to N15,700, Supa package from N7,600 to N9,600, and Max package from N5,700 to N7,200.

While the Jolli package was jacked up from N3,950 to N4,850, the Jinja package moved from N2,700 to N3,300, and Smallie package from N1,300 to N1,575.

The PAPERS reports that the company implemented an upward review of prices in December 2023, days after announcing a $72m loss in its financial statement for the third quarter of the year.

Checks on the company’s reviewed price list then showed a 20 per cent per cent hike in the company’s packages across the board.

 

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UBA branches sealed over alleged N14.3 million unpaid tax

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The Kaduna Internal Revenue Service, KADIRS, on Wednesday sealed the United Bank for Africa branches in the state metropolis over

The Kaduna Internal Revenue Service, KADIRS, on Wednesday sealed the United Bank for Africa branches in the state metropolis over alleged N14.3million unpaid tax.

Speaking to newsmen after the excercise, Aysha Ahmad, the KADIRS Board Secretary/Legal Adviser, said the enforcement was to ensure tax compliance in the whole state in respect of withholding taxes and money agents.

“We sent so many demand notices to them. We have asked them to pay the money but they refused, we are left with no other option but to enforce,” she said.

Mrs Ahmad added that the service wants voluntary compliance of tax payment, while lamenting that the defaulter had been recalcitrant.

She, however, said when the defaulters pay, the service would unseal the premises.

Speaking further, the board secretary said the the enforcement was part of a rocess to achieve the N120billion revenue target set by the Kaduna state government.

“To achieve a target, there is always a starting point. Sealing UBA branches in the state for tax default is our start. We are also going after all other defaulters to get what is due for the state government.

“We served them with demand notices . We have been communicating with their consultant and Headquarters. Infact, they even took us to court and the outcome was like a win-win situation at the tax appeal tribunal.

“The court gave us directives to review our assessment which we did and they did not still comply. It is on the reviewed assessment we are enforcing this morning,” she said.

Mrs Ahmad called on the people of the state to ensure voluntary tax compliance, describing it as a civic responsibility.

NAN

 

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MTN records highest number of subscribers porting to other networks

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Telecommunications giant, MTN, has recorded the highest number of subscribers porting out of its network since inception to December 2022.

Telecommunications giant, MTN, has recorded the highest number of subscribers porting out of its network since inception to December 2022.

This is according to the Nigerian Communications Commission in its newly published 2022 Subscriber/Network Data Annual Report.

The report represents the analysis of the Subscriber and Service Data – Porting Trend in Nigeria, from May 2013 to December 2022.

The analysis revealed that of the four major GSM operators in the country, 444,226 subscribers ported out of MTN to other network providers, as against Airtel, Glo and EMTS that respectively recorded 351,422; 277,527; and 190,724 customers porting out.

The analysis also revealed that EMTS recorded 676,944 port-ins, representing the highest number of subscribers porting into its network, followed by AIRTEL with 331,837; MTN with 181,301; and Glo with 105,746 port-ins.

A segment of the report titled, ‘C. subscriber & service data – porting trend in Nigeria as at December 2022’, highlighted the number of GSM porting activities across the four major network providers in the country.

It read, “Table 14 below shows the trend of Nigeria’s porting activities from inception (May, 2013 to December, 2022) for the four (4) major GSM Operators. The analysis illustrates that EMTS had the highest count of Port-in subscribers [676,944] while Airtel, MTN and Glo respectively recorded the following counts of port-in as follows [331,837]; [181,301] & [105,746].”

“Similarly, our analysis from May, 2013 to December, 2022, reveals that MTN had the highest number of subscribers that ported-out [444,226] to other networks while Airtel, Glo & EMTS are as follows [351,422]; [277,527] & [190,742] respectively.”

 

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