Author Topic: Banks Boost Lending Despite Hard Times  (Read 141 times)

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Banks Boost Lending Despite Hard Times
« on: June 28, 2017, 04:08:07 AM »
An analysis of the 2016 audited financial results of 13 banks, including Stanbic IBTC Bank, has shown that despite low productivity in the manufacturing sector, the lenders recorded about 16.1 percent increase in total credit to the real sector, from the N1.8 trillion in 2015 to N2.1 trillion in 2016. This underscores the pivotal role banks play in the resurgence of the economy, writes COLLINS NWEZE.

Moses Martins, a Small and Medium Enterprise (SME) operator based in Lagos, was one of thousands of Nigerians that benefited from bank loans to start his business.

Within the last one year, the entrepreneur has secured a short-term loan worth N12 million to enable him boost his business, that includes sourcing for rubber needed by plastic companies.

Today, Martins is happy that his lender  had, despite the ongoing recession in the country, continued to support his business by providing him with enough credit to thrive.

Interestingly, data from 2016 audited financial results of 13 banks, including Stanbic IBTC Bank Plc, showed that the lenders gave loans worth N2.1 trillion to customers within the period, despite the economic recession.

The funds were advanced to beneficiaries despite low productivity in the manufacturing sector, underscoring the pivotal role banks play in helping the economy to grow.

?It is gratifying to see that despite the prolonged economic downturn in Nigeria, which reached an all-time-high in 2016, made worse by the hard-hitting recession, Stanbic IBTC Bank Plc, and a few other Nigerian banks, were still able to provide a significant level of funding to drive and sustain growth in the real sector in critical areas like manufacturing, trade and Small and Medium scale Enterprises (SMEs),? Martins said.

He said that many of the commercial lenders are now retooling their strategies to drive digitisation, increase focus on real sector and diversify their lending.


Real Sector Support Facility (RSSF)

In January, last year, the CBN introduced a N300billion special intervention fund which was meant to unlock the potential of the real sector to stimulate output, growth, value added productivity and job creation.

The N300 billion Real Sector Support Facility (RSSF) was geared towards increasing credit to priority sectors of the economy. Five commercial banks, including Stanbic IBTC Holdings Plc, invested about N245.8 billion in the facility.

Others are Zenith Bank Plc, United Bank Plc, Access Bank and Diamond Bank Plc. The N300 billion was meant to unlock the potential of the real sector to engender output growth, value added productivity and job creation.

The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, said the RSSF is expected to support large enterprises for start-ups and expansion of financing of up to N10 billion.

Commercial banks were to contribute five per cent of total naira deposits, and  the facility will be used to support large enterprises for startups and expansion financing needs of N500 million up to a maximum of N10 billion. Stanbic IBTC contributed N20.8 billion towards the special intervention fund in 2016 and has already signified its intention to sustain its support for the sector.

It is expected that the trade would be boosted in 2017 as the CBN continues to support the market by pumping in millions of dollars, making the banks better placed to meet the needs of their customers. Already, reports have shown a rise in forex transactions in the last few months, which is a plus for trade.

According to Emefiele, Nigeria?s trade balance sheet in the last few years points to the need for concerted effort by both the government and the private sector to stimulate trade, local production and export to ease the pressure on foreign exchange demand.

?Basically, Nigeria is an import-dependent country. Importation requires foreign exchange and given the current forex situation, it is very difficult for the country to provide the required foreign exchange because of declining revenue from oil export due to falling prices. It then becomes very challenging for many import-dependent industries to source much needed raw material and machinery,? he said.

Financial analyst and Chief Executive Officer, Financial Derivatives Company, Bismark Rewane, expressed optimism that the economy is on the right path to recovery and growth.

Nigerian private sector activity expanded for a second straight month in February, driven by a rise in new business despite a fall in export sales, a survey showed on Friday.

The  Stanbic IBTC Nigeria Purchasing Managers? Index (PMI) rose to 52.2 last month after rising to 51.9 in January, the strongest reading since December 2015. A reading above 50 denotes growth.

Economists expect the economy to slowly emerge from its ongoing recession this year, buoyed by improved government spending and dollar availability.

?The faster than anticipated recovery in the economy may not be unrelated to the fact that surveyed respondents continue reporting an expansion of output, perhaps due to increased supply of FX needed for import activity and domestic investment,? said Ayomide Mejabi, Economist at Stanbic IBTC Bank.

The CBN has increased forex sales on the official market in recent days after effectively devaluing the naira for individuals, offering to sell them dollars at about half the premium charged on the black market.

Nigeria?s economy suffered its first annual contraction in over two decades last year amid galloping inflation owing to lower oil income and dollar shortage as the country battled a recession.

Mejabi said output prices continued to rise in February, but the pace was significantly slower and fell to their lowest level since January 2016.

On Wednesday, Central Bank?s PMI report said private sector activity slowed in February as new orders and production levels fell due to a shortage of hard currency that made it difficult for companies to source raw materials.

The Stanbic IBTC Markit report said an overall increase in new business led to a rise in purchasing activity as companies added to their inventory at a faster rate, and that growth occurred despite a fall in new export sales.

On technology, Co-Founder and Director of Programmes, Co-Creation Hub Nigeria, Femi Longe, explained at a forum organised by Stanbic IBTC that opportunities abound around innovation and digital technology for Nigerian businesses.

Longe, who spoke on ?Technology and the Nigerian economy,? said the benefits of technology and innovations are innumerable for the individual, business and economy. The ability to identify new opportunities and develop appropriate business strategies based on the ingenious application of cutting edge technology will make a huge difference, he said. Rather than wait for foreign investment to drive Nigeria?s development, he said the country should explore home-grown solutions to its economic needs.

In pursuing this objective, Longe said, partnerships between start-ups and businesses are imperative. The expansion of social and economic enablers such as power, roads, communication, ICT, transport, education and health will trigger exponential economic growth and aid the ease of doing business in the country, he added.


Trade finance

Stanbic IBTC Bank Plc, interestingly, long before the forex squeeze actually kicked in, had the foresight not to focus on importation alone having realised that this was just one aspect of trade. Instead, it gleaned from the experiences of its parent company?s financing trade in over 20 African countries and other developed economies outside of Africa to focus on exports, which generate foreign exchange rather than requiring foreign exchange.

Presently, the bank is very big on exports and continues to expand that footprint. The bank currently supports SMEs in the production and export of cocoa, sesame seeds, hides and skin, and ginger among others.

The bank supports quite a number of clients in a wide array of the export sector and that the sector is constantly expanding, which is why the scope of service and support provided by the bank goes beyond financing and advisory services, in line with what the government is trying to do in getting non-oil exports off the ground and moving.

Stanbic IBTC Bank provides support for manufacturers, big traders and general goods merchants in the markets. Asserting that part of the ways the bank is trying to fix the gaps in the forex situation is coming out with other innovative solutions and engaging with suppliers of its clients to explain the situation here in the country. These engagements has led to very favourable terms for many of the bank?s clients as it strives even further to help structure different dynamics by putting in guarantees on behalf of its clients to help them move some of the trade ahead.

Realising the peculiarity of the period we are in, which requires creativity in dealing with trade; the bank is using a lot of guarantees where it acts as an intermediary for its clients?; based on its understanding of their businesses and the importance of commerce and trade to driving the economy.


Global experience

Stanbic IBTC Bank?s connection to Africa?s largest bank by asset, Standard Bank Group, without doubt puts it at a vantage position to support the Federal Government?s effort to diversify the economy and to better cater for the needs of its clients from both a continental and global perspectives.

Standard Bank Group?s in-depth knowledge and connection to ICBC reinforce the bank?s expertise and experience in trade financing, especially with China?s fast growing fame as one of the biggest trade partners to many African countries, including Nigeria.

Coincidentally, ICBC, the biggest bank in the world, has 20 per cent stake in Standard Bank; so, by extension, it means that ICBC also has a share in Stanbic IBTC. The implication of this is that Stanbic IBTC Bank by virtue of its heritage and connection can play a major role in improving the ease of trade with China as well as with other developed economies.

Last year, the Federal Government announced a currency swap deal between the Nigerian Central Bank and ICBC. Although this is yet to reach fruition, if things work out as planned, importation from and exportation to China would be better processed, expedited and seamless. So rather than invoicing in dollar, and then converting to Yuan, invoices can be prepared directly in Yuan or RMB. Eliminating third currency cross as currently obtained, where Nigerian traders use naira to buy dollar and then cross the dollar to Yuan. Traders would be able to just take the naira to buy the Yuan. This is supposed to reduce demand pressure on dollar. However, since the announcements, there has been no further action from the CBN.

In the meantime, the nation waits patiently to see what the guidelines and modalities would look like. However, if it works out according to plan, it should ease the pressure on the dollar. Presently, 22 percent of imports into Nigeria come from China. If that 22 percent leaves the demand for USD, it should go a long way to ease the dollar crunch and might even affect the exchange rate in the long run. Stanbic IBTC Bank, being a part of ICBC, is uniquely positioned to take advantage of that when it comes fully on-stream.


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Banks Boost Lending Despite Hard Times
« on: June 28, 2017, 04:08:07 AM »

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