The impact of climate technologies is becoming more and more pronounced as the hottest investment destination, according to a report by “Africa: The Big Deal.”
Despite the global slowdown in startup funding, particularly in the previously dominant Fintech sector, Climate Tech attracted $325 million, representing 45% of all startup investments in Africa so far.
Being a broad term, climate technology encompasses a wide range of technologies and processes that are designed to address climate change.
This includes everything from renewable energy sources like solar and wind power; to energy efficiency measures like smart grids, and electric vehicles.
The report noted that, so far in 2024, startup funding in Africa has not been what it was the previous years. In line with a global context that remains quite gloomy, one of the key reasons is the significant drop in investments in the Fintech space.
Indeed, Fintech only represents 22% ($158 million) of the funding raised this year so far in Africa, while at the same time last year, it made up more than half of the total ($852 million out of $1.7 billion).
As a result, the sector attracting the most funding in 2024 so far is not Fintech but Logistics & Transport, accounting for 29% ($215 million). Energy & Water follows closely in third place, securing 18% ($132 million) of the total investments.
An analysis of the funding raised by startups in Africa between January and May 2024 reveals that Fintech attracted $30 million, Energy & Water $132 million, Deeptech $10 million, Logistics & Transport $95 million, and Agric & Food $68 million.
This indicates that Climate Tech accounts for 45% of the total funding announced on the continent this year, amounting to $325 million—an all-time high since tracking began in 2019. Climate Tech funding has seen consistent growth over the past five years, rising from $340 million in 2019 to $1.1 billion in 2023.
The investment boom in 2021 and 2022 did not benefit Climate Tech as much as other sectors like Fintech, leading to a decrease in its share of total investments: from 25% in 2019 and 32% in 2020 to just 14% in 2021 and 21% in 2022.
However, this trend reversed in 2023, with Climate Tech capturing 36% of the total investments. It appears poised for further growth in 2024, already accounting for 45% of investments so far, although surpassing last year’s $1.1 billion investment seems unlikely at this stage.
Through the USAID Bureau for Resilience and Food Security (RFS), Policy Link provides essential support to CAADP and incubates development solutions that can be scaled through USAID Missions in other countries.
Kudzai Madzivanyika, the Senior Manager, Regional Trade and Policy at USAID Policy Link, provided an update on the state of agriculture in Africa, noting that the productivity of both land and labour in Sub-Saharan Africa is low.
Crop yields in this region are significantly lower compared to other regions, with the average yield across Africa being half that of India and one-fifth of the yields in the US.
Her words: “Crop yields in Sub-Saharan Africa are very low relative to other regions, with the average across Africa being half that of India and one-fifth of the yields in the US. 40% of Sub-Saharan Africa’s population still live below the international poverty line of $1.90 per day.”
Madzivanyika also emphasized that Sub-Saharan Africa generates less than half of the global average amount of agricultural value added per person working in agriculture.
Declaration’s commitments, but the analysis of the situation has fallen short, emphasized the importance of robust interventions.
She highlighted that recommendations from the forum will form part of the suggestions towards improving continent wise agricultural performance, and addressing existing challenges on the road to eradicating hunger and malnutrition in Africa.
Meanwhile, Bizou Ahouanmenou an International expert Elise Bizou Ahouanmenou emphasized the importance of member states meeting the requirements of the Malabo Declaration, which was adopted by African Heads of State and Government in 2014.
The declaration outlined goals to enhance agricultural development and revolutionize the sector for mutual prosperity.
With the declaration’s term coming to an end in 2025, she highlighted the urgent necessity for private sector involvement to bolster ongoing initiatives and pave the way for future advancements under the Post-Malabo Agenda.
Despite significant efforts over the past two decades, Africa has not fully met the ambitions goals outlined in both the Maputo (2003) and Malabo (2014) Agendas.
CAADP has been instrumental in guiding agricultural transformation efforts, providing a framework for collaboration among African Union institutions, regional bodies, and member states.
The upcoming Post-Malabo Agenda development process presents an opportunity to address existing challenges, leverage emerging trends, and outline a new agenda that fosters sustainable agricultural development, food security, and economic growth.
The Post Malabo Agenda development process will involve stakeholder consultations, research and analysis, design and drafting, and political mobilization across the continent, culminating in the declaration of a new agenda and commitments by the Heads of State and Government (HOSG) by the end of January 2025.
This process will consider the review of ECOWAS Agricultural Policy (ECOWAP) for West Africa to ensure consistency, relevance, and complementarity, while also avoiding duplication of efforts.
Multichoice, the operator of DStv and GOtv, has reported a loss of 4.1 billion rand, an equivalent of ($225.8 million at current exchange rate).
This was revealed in Multichoice’s financial report, for which the year ended on March 31, 2024.
The company recorded a loss for the second year running, its audited accounts released showed.
According to MultiChoice, the net foreign exchange translation losses resulted from losses on “USD-denominated non-quasi equity loans between MultiChoice Africa Holdings B.V. and MultiChoice Nigeria Limited.”
This, it added, “follows the depreciation of the naira against dollar from a closing rate of N464.50 in FY23 to N1 308.00 in FY24.”
According to the income statement, revenue dropped 5.9% to 55 billion rands due to a slide in subscription fees.
“The combination of foreign exchange headwinds and a lower subscriber base resulted in a net decline in group revenues of 5% to ZAR56.0 billion,” MultiChoice pointed out.
General and administrative expenses jumped to 18.4 billion rands from 16.6 billion rands a year earlier after surges in employee costs and software license expenses, weakening operating profit.
However, Multichoice’s diversification strategy has led to significant growth in other segments, such as; Showmax, SuperSportBet, and Moment. These new revenue streams have contributed to the company’s overall performance, offsetting some of the challenges faced by DStv.
According to the financial results, several of the company’s other products and services also performed well. Showmax, in particular, has shown impressive growth, with a successful relaunch across 44 markets in sub-Saharan Africa and a significant increase in active users.
Contrary to popular belief, Multichoice’s financial results have revealed that the company is not making enormous profits from its DStv satellite television service.
While the company has shown resilience in a challenging economic environment, its financial performance indicates a different story.
Highlighting the company’s achievements in the face of adversity, Multichoice Group Chief Executive Officer, CEO, Calvo Mawela, said despite a tough year, the company delivered a trading profit margin of 26% in South Africa and a 48% increase in trading profit in Africa.
“We’ve just published our results for the past financial year, which ended in March 2024. The year has been like no other in terms of economic turmoil, but we showed resilience and navigated significant headwinds – managing our business with focus, dedication, and tenacity”, said Mawela.
He added that the company’s financial results were a testament to its ability to adapt and innovate in a rapidly changing market, noting that the emphasis on efficiency has positioned the company for future growth, despite the challenges faced by its satellite television service.
“KingMakers delivered strong growth in the online business in Nigeria by growing monthly active online users by 37% and online gross gaming revenues by 26%, year-on-year in constant currency. The business launched BetKing Casino and a virtual football sportsbook service, BetKing FootballGO, in Nigeria and SuperSportBet in South Africa”, the CEO stated.
According to him, “SuperSport continues to bring fans the best of sports from across the globe. In the past year, we broadcast over 34,000 action-packed sports events, more live sports than any other broadcaster in the world. Highlights of the year were the Rugby World Cup, Cricket World Cup, Netball World Cup, FIFA Women’s World Cup and AFCON.
“Also, SuperSport Schools continues to grow strongly and more than doubled its registered user base during the year. Showcasing South Africa’s talent of the future, the platform displayed 49,000 hours of live programming across 43 different sports, covering 1,100 schools and 14,500 teams.”
Mawela emphasized the company’s dedication to creating authentic African stories. “We are the largest producer of original content on the African continent and remain committed to creating and growing authentic African stories.
We produced over 6,500 hours of local content, to bring our local content library to 84,000 hours of content. More than half of our general entertainment budget is spent on local content.”
With a cost savings target of ZAR2 billion (108.9 million) set for the upcoming year, the company is set to continue its trajectory of growth and innovation.
“We know that nobody else has the content we have for the customers we serve. This puts us in a great position to prosper – by better understanding our customers’ entertainment choices, identifying their needs and tapping into the growth opportunities that arise along the way.
“In the year ahead, our focus will be to drive scale in Showmax, Moment, and SuperSportBet and to grow DStv Insurance, DStv Internet and DStv Stream. We are purposefully pursuing our vision of becoming Africa’s entertainment platform of choice with determination and vigour. Significant progress has been made towards achieving this strategic objective.
Our combined efforts will put our business in a strong position to prosper once the macro-economic environment stabilizes”, the Multichoice boss assured.
MultiChoice, the owner of DStv and GOtv, has been forced to revert to its old subscription prices following a court order.
The company had previously increased its prices, but the court ruled that the hike was unjustified. According to reports, the company has lost over a million subscribers in Nigeria due to the price increase.
The price hike was implemented to align with market realities following high inflation in Nigeria and the naira’s devaluation.
The old prices are as follows: DStv Premium package: N29,500 (down from N37,000); DStv Compact+ package: N19,800 (down from N25,000); DStv Compact Bouquet: N12,500 (down from N15,700); DStv Confam package: N7,400 (down from N9,300); DStv Yanga package: N4,200 (down from N5,100); DStv Padi package: N2,950 (down from N3,600).
GOtv subscribers will also see a reduction in prices, which is as follows: GOtv Super+ package: N12,500 (down from N15,700); GOtv Super package: N7,600 (down from N9,600); GOtv Max package: N5,700; GOtv Joli package: N3,950; GOtv Jinja package: N2,700 (down from N3,300).
It is not clear if MultiChoice will also offer a month-free subscription as ordered by the court. However, the company has promised to challenge the court order, saying the ruling does not favour its business model.
The Nigerian Investment Promotion Council (NIPC) has granted fresh tax holidays to 12 companies in the first quarter of this year, increasing the number of total beneficiaries to 104 companies.
According to the NIPC report, these 12 companies were given tax holidays for an initial period of three years. They include Fouani Nigeria Limited; Neway Power Technology Company Limited; Starich Recycle Technologies Company Limited; Gerawa Rice Mills Limited; Shafa Energy Limited; Mafa Rice Mills Limited; A. A Rano Nigeria Limited (haulage); and A.A Rano Nigeria Limited (Natural gas supplier).
Others are Basma Agric Processing Limited; Flex Films Africa PVT Limited; Addmie Nutrition Limited; and Dufil Prima Foods Plc.
NIPC is charged with the responsibility of granting tax holidays to eligible companies. Meanwhile, the body also made an average of N1 billion annually, according to an analysis of its internally generated revenue between 2020 and 2023. The fees also represent a major source of revenue for the commission.
Tax incentives have been a contentious issue due to the high amount of revenue lost to waivers granted every year. Economic experts stressed the role of tax waivers in driving economic growth but questioned the transparency and objective rate of the Federal Government in granting tax waivers.
The pioneer status is an incentive offered by the Federal Government, which exempts companies from paying income tax for a certain period. This tax exemption can be full or partial.
Offered under the Industrial Development Income Tax Act with tax reliefs for three years, the incentive is generally regarded as an industrial measure aimed at stimulating investments in the economy.
The products or companies eligible for this pioneer status are those that do not already exist in the country. The report also stated that the companies had invested N125.74 billion in its operations and production.
In addition, NIPC said it also approved in principle nine other companies, which will join the beneficiary companies after fulfilling certain conditions.
NIPC added that 18 new PSI applications were received in the first quarter of this year, while eight firms applied for an extension of their tax holiday, but only two were granted extensions.
Meanwhile, a further breakdown showed that the commission earned N3.1 billion in 2020, dropped to N1.92 billion in 2021 before increasing to N2.1 billion in 2022 and N2.11 billion in 2023.
The Chairman of the Presidential Tax Reform Committee, Mr Taiwo Oyedele, has said that the government will not stop the lamentation of waivers granted to companies until the new tax reforms are passed into law.
He added that the new law would not reverse the tax holiday being enjoyed by the companies as it contradicted the committee’s intention to attract investments.
“The rules we have drafted concerning whatever exemption you get at the time our laws are enacted will respect it, if it is three years, you would enjoy the tax holiday. We are talking about the country; three to five years is not the end of the world.
“If we reverse anything that has been granted, that’s a contradiction to what we stand for. Whether we agree to the process is a different conversation but anyone that gets pioneer status would be allowed to run the course of that tax holidays but once our laws are enacted, you won’t be able to get fresh ones.”
Kogi, Ekiti, and Kwara have the highest level of food inflation on the year-on-year basis analysis, Techeconomy can report.
According to the recently released National Bureau of Statistics report, in May 2024, Kogi led with (46.32%), while Ekiti had (44.94%), meanwhile Kwara (44.66%), Adamawa (31.72%), Bauchi (34.35%) and Borno (34.74%).
On the other hand, Borno (34.74%), recorded the slowest rise in Food inflation on a Year-on-Year basis.
However, on the Month-on Month analysis, for May 2024, food inflation was highest in Gombe with (4.88%), Kano (4.68%), and Bayelsa (3.62%), while Ondo (0.02%), Yobe (0.95%) and Adamawa (1.02%) recorded the slowest rise in Food inflation on a Month-on-Month basis.
The all-Items inflation rate on a Year-on-Year basis was highest in Bauchi (42.30%), Kogi (39.38%), and Oyo (37.73%), while Borno (25.97%), Benue (27.74%) and Delta (28.67%) recorded the slowest rise in Headline inflation on Year-on-Year basis.
The Food inflation rate in May 2024 was 40.66% on a year-on-year basis, which was 15.84% points higher compared to the rate recorded in May 2023 (24.82%).
The rise in food inflation on a year-on-year basis was caused by increases in prices of the following items: Semovita, Oatflake, Yam flour prepackage, Garri, and Bean, (which are under Bread and Cereals Class).
Others are; Irish Potatoes, Yam, Water Yam, etc (under Potatoes, Yam and other Tubers Class), Palm Oil, Vegetable Oil, etc (under Oil and fat), Stockfish, Mudfish, Crayfish, (under Fish class), Beef Head, Chicken-live, Pork Head, Bush Meat, (under Meat class).
The month-on-month Food inflation rate in May 2024 was 2.28%, which also shows a decrease of 0.22% compared to the rate recorded in April 2024 (2.50%).
The fall in the Food inflation on a Month-on-Month basis was caused by a fall in the rate of increase in the average prices of Palm Oil, Groundnut Oil (under Oil and Fats Class), Yam, Irish Potato, Cassava Tuber (under Potatoes, Yam & Other Tubers Class), Wine, Bournvita, Milo, Nescafe (under Coffee, Tea and Coco Class)
The average annual rate of foodinflation for the twelve months ending May 2024 over the previous twelve-month average was 34.06%, which was 10.41% points increase from the average annual rate of change recorded in May 2023 (23.65%).
The issue of multinational corporations exiting Nigeria has become a recurring headline reaching a bothersome threshold.
Nigeria, one of the indisputable economic giants of Africa, is on the verge of losing its crown as Multinational corporations (MNCs) – the very indispensable factors of foreign direct investment (FDI) – are abandoning ship at an alarming rate.
In 2020 alone, over 10 companies shut down operations, including well-known names like Standard Biscuits Ltd, NASCO Fiber Products Ltd, and Union Trading Company (UTC) Nigeria PLC.
2021 witnessed an even greater exodus, with more than 20 companies leaving Nigeria. This list includes Tower Aluminum Nigeria PLC, Stone Industries Ltd, Mufex Nigeria Ltd, and Framan Industries Ltd.
The trend continued in 2022, with over 15 major brands exiting the market, such as Universal Rubber Company Ltd, Mother’s Pride Ventures Ltd, and Errand Products Ltd.
The year 2023 saw a further 10 major multinational corporations depart, including Equinor Nigeria Ltd, GlaxoSmithKline Nigeria Plc, and Bolt Food & Jumia Food Nigeria. The first half of 2024 alone has already recorded the departure of five major companies including Microsoft, Diageo PLC, PZ Cussons PLC and Kimberly-Clerk.
The cumulative lost output due to these multinational exits is estimated to be N95 trillion since 2020. This data comes from research conducted by Dr Vincent Nwani.
Source: Dr Vincent Nwani
It’s easy to point fingers at foreign exchange scarcity, naira decline, poor infrastructure, power supply issues and exorbitant energy costs. However, going deeper beyond the surface, we see a subversive aspect which is the rise of the “frenemy” economy, regulatory issues and many more.
The Frenemy Economy
The “frenemy” economy theory proposes that Nigeria’s economic challenges are not solely driven by internal factors, but also by the calculated moves of a rising global power.
The aggressive “go-global” strategy prioritizes establishing a foothold in strategic African markets.
Here’s how it plays out:
Predatory Pricing: Manufacturers, often backed by state subsidies, can undercut established Multinational Corporations on price. This tactic, known as “dumping,” floods Nigerian markets with cheaper goods, squeezing profit margins for Western companies.
Infrastructure Investment with Strings Attached: Heavy investments in infrastructure projects across Africa, with hidden agendas. Such firms may be prioritized for contracts, creating an uneven playing field for foreign competitors.
Paralyzed Local Competition: The influx of competitive goods and services leads to suppressed local competition and also limits technology transfer and knowledge sharing.
Some of these companies struggled against cheaper imports in the home care and hygiene sectors, and even the beverage sector where we have cheaper beer brands. Few exited specific segments, while others shifted to an import-only model, essentially surrendering local production to competitors.
The frenemy economy theory is controversial. While some see these products as a predatory factor, others view them as a much-needed source of investment and infrastructure development. The truth is likely somewhere in between.
Regulatory Issues and Policy Inconsistency
Nigeria’s regulatory environment is very unpredictable, with frequent changes in policies that catch businesses off guard. Companies like Unilever and GSK didn’t just face operational challenges; they also encountered a lack of clear, consistent regulatory frameworks.
For instance, sudden shifts in import tariffs or changes in tax laws can drastically alter the business industry overnight, making long-term planning virtually impossible. When businesses cannot predict the regulatory environment, it undermines confidence and hampers investment.
While multiple taxation is often pointed to, the real impact goes beyond financial strain. It creates an environment of pervasive uncertainty and breeds corruption. Companies often find themselves negotiating with various levels of government, each demanding its cut.
This inflates costs and also encourages a culture of bribery and under-the-table deals, affecting the sincere foundation of business operations.
Insecurity: The Silent Killer of Business Confidence
Insecurity in Nigeria is not just a physical threat; it’s a huge business risk. Companies are not just losing money to theft or damage; they’re losing investor confidence. The perception of Nigeria as a high-risk environment deters potential investors and partners, shrinking the market and limiting growth opportunities.
The Rise of Local Competitors
While multinational exits garner headlines, they also clear the way for local companies to step up. Nigerian businesses, though often undercapitalized, are more adaptable to the local market’s nuances. They understand the cultural context better and can operate more flexibly within the challenging environment.
Bolt Food’s exit in December 2023 was seen as a blow to the delivery market. However, it has opened opportunities for local startups to fill the gap. These indigenous companies, though smaller, are better positioned to scale local challenges and attend to Nigerian consumers more effectively.
Our thoughts!!!!!!
“The beauty of Israel is slain upon thy high places: how are the mighty fallen? Tell it not in Gath, Publish it not in the streets of Askelon; lest the daughters of the Philistines rejoice, lest the daughters of the circumcized triumph.”
The passage above aptly describes the current state of our nation, where over 800 multinational corporations have fled, each citing various reasons for their departure.
The reasons for this mass exodus, along with justifications from those responsible for leading Africa’s most populous country, may vary. However, the undeniable economic and social damage will manifest in increasing unemployment rates, potentially leading to further social unrest.
Nigeria’s beauty appears to be fading as multinational corporations, some of which have operated here for decades, are leaving. The news has spread far and wide, causing celebration among our competitors.
Yet, all is not lost. We must take prompt actions and calculated steps to rescue our economy and stop the continuous departure of major multinational corporations. Simultaneously, we should focus on developing domestic companies.
We opine that every change is triggered, worked at, planned and consistently nurtured to arrive at a desired end. No one gets anywhere of worth, without focus. As a country, therefore, we must be ready to do the needful and arrest the flight of multinational corporations in Nigeria.
To address this critical, yet surmountable challenge, we propose the following solutions:
Ensuring Stability and Availability of Foreign Exchange for Business
Currency fluctuations are a natural outcome of floating exchange rates, although numerous factors influence exchange rates, including a country’s economic performance, the outlook for inflation, interest rate differentials, capital flows and so on.
A currency’s exchange rate is typically determined by the strength or weakness of the underlying economy. As such, a currency’s value can fluctuate from one moment to the next.
A year ago, the current administration, through the Central Bank of Nigeria (CBN), collapsed forex into an import and export window, scrapped the RT200 rebate, and the Naira4dollar remittance schemes. Of course, this directly culminated in a 2.2 trillion gain in the Equity market, a trait applauded by experts. But these have not been sustainable over time.
Foreign exchange volatility can have significant impacts on businesses, especially those involved in international trade. Such impact manifests in pricing, profits, and competitive advantage supply chain.
However, in the medium term, Apex Bank needs to have a consistent focus on price stability, increased transparency and clear communication, as well as a clear framework for FX interventions.
For the long-stated objective, Nigeria’s policymakers need to diversify its export base, which given Nigeria’s labour abundance, distils to ensuring that industrial activity is geared towards the production of exportable goods that use a lot of low-skilled labour that is abundant in Nigeria.
Expectedly, many people do not pay attention to exchange rates, because rarely do they need to. The typical person’s daily life is conducted in their domestic currency. However, exchange rates only come into focus for occasional transactions, such as foreign travel, import payments or overseas remittances.
An international traveller might harbour for a strong domestic currency because that would make travel to Europe inexpensive. But the downside is a strong currency can exert a significant drag on the economy over the long term, as entire industries are rendered noncompetitive and thousands of jobs are lost. While some might prefer a strong currency, a weak currency can result in more economic benefits.
With several failed attempts at transitioning to a flexible exchange, it was time for Nigeria to embrace another. This attempt needs to be situated within the context of wider discussions about macroeconomic strategy within the appropriate time frames.
Mere FX adjustments to adapt to reality may lead to short-lived gains, followed by a return to previous practices. To avoid this cycle, forex and monetary policies should be part of a comprehensive economic plan where the exchange rate serves as a tool for export diversification and for attracting capital flows to foster overall development. Successful fixed-to-floating transitions are characterized by certain key features.
The Government Must Work at reducing Inflationary Trends
The latest data released by the Nigeria Bureau of Statistics, (NBS), yesterday Saturday, 15th, 2024, indicated that Nigeria’s annual inflation rate had risen to 33.95% in May from 33.69% in April.
The statistics office said the May 2024 headline inflation rate showed an increase of 0.26% points when compared to the April 2024 headline inflation rate. The implication of this is that on a year-on-year basis, the headline inflation rate was 11.54% points higher compared to the rate recorded in May 2023, which was 22.41%.
Meanwhile, skyrocketing inflation for business is a harbinger of the increased cost of raw materials, causes supply chain disruptions, increases overhead and inventory costs, and brings about higher interest rates. Other effects include stymied investments, reduced employment and growth rate.
Thus, creating tax breaks picking some top sectors to grow more intentionally and providing some policy reform that will make it easy for people to do trade and business in those promising sectors may be the right way to go. There is the dire and urgent need for the government to come up with an investment-friendly road map, at the state level that can make it easier for investments and businesses to thrive.
Once there is a comparative advantage across the states, it means that even the multinationals will now know where their factories will be. It is not gain saying that inflationary pressure, and foreign exchange volatility are seriously impacting input costs, operating expenses and the general profitability of businesses in the country.
Nigeria’s inflation has been higher than the average for African and Sub-Saharan countries for years now, and even exceeded 16% in 2017 – and a real, significant decrease is nowhere in sight. The bigger problem is its unsteadiness, however: An inflation rate that is bouncing all over the place, like this one, is usually a sign of a struggling economy, causing prices to fluctuate, and unemployment and poverty to increase.
Nigeria’s economy, a so-called “mixed economy”, which means the market economy is at least in part regulated by the state is not entirely in bad shape, though more than half of its GDP is generated by the services sector, namely telecommunications and finances, and the country derives a significant share of its state revenues from oil.
For the businesses that are still navigating the uncertain terrain of Nigeria’s economy, we recommend that they embrace; innovation, invest in people, collaborate more and leverage on technology.
The Government Should Work on Social Security Schemes
In this “Yam Pepper scatter Scatter” situation that we have found ourselves in, when people are out of jobs, there should be a means they can collect funds at the end of the month, depending on the time they spend employed or to get other jobs.
The idea is that economic activity should continue; whatever interest they get, they are not going to keep the cash. They are going to buy foodstuffs and consumables that will keep the manufacturing businesses going.
As those businesses are growing, they will continue to upgrade, continue to employ, and fit into controversy, and we hope that the government will do the needful, conduct the necessary investigation, and repackage this scheme to meet the yearning and expectations of the Nigerians.
“In this life, rain is going to fall, but the sun will shine again,” – Kwame Alexander
When Loans Go Bad
Despite a turbulent decade, FBNH, Nigeria’s oldest financial market lender, has demonstrated remarkable resilience in overcoming odds associated with a legacy institution.
It has effectively tackled issues such as board governance recalibrations, high cost-to-income ratios (CIRs), poorly balanced loan asset distribution, large non-performing loans (NPLs), and overweight bank clearing house exposures to lower-tiered deposit-taking institutions.
This period of adversity may potentially strengthen the financial group, making it more resilient, better managed, and focused; even as it looks into management resource capacity building and resolution of structural adjustments needed to reposition the bank post-recapitalization.
Recent public information will suggest that while the bank moves to quickly affirm a substantive managing director and set about the task of recapitalization; the work done to date by the previous management will further benefit from a swift resolution of the numbers from a post CBN-oversight review around balances arising from digital banking operations returns, unreconciled balances, FX-related deposit movements, and standard loan balances review.
Analysts believe the CBN’s payment of Heritage Bank’s debt, as determined, not only signaled a positive outlook for the bank with the reduction of the forbearance balances on FBNH’s books; but strengthened its position as a systemically important bank (SIB).
Speaking anonymously, an insider expressed optimism about the bank’s future, stating, ‘With the Heritage Bank issue resolved, we can now focus on regaining an industry position more consistent with the bank’s age, pedigree, and collective staff expertise.’
This positive outlook should inspire confidence among stakeholders in FBN’s future since the banking arm continues to dominate the group’s operation.
Analysts observed that FirstBank has shown resilience in the face of internal and external difficulties, showing relatively strong financial performances in FY 2023 and Q1 2024.
The asset repricing on loans and advances and off-balance sheet asset gains nudged gross earnings forward, thereby cushioning the heavy foreign exchange losses and rising operating expenses.
FBNH’s gross earnings and pre-tax profit grew by +95.70% and +126.86% to N1.60trn and N350.59bn in FY 2023, and even higher growth performance was recorded in Q1 2024 (+181.43% and +325.15% for gross earnings and PBT, respectively).
The strong gross earnings and profit growth resulted in improved financial ratios, except for the cost of risk (CoR) and the non-performing loan (NPLR) ratios, reflecting rising funding costs and the deterioration in loan quality.
However, the group’s niggling operating headache eased in Q1 2024 as the lender’s cost-to-income ratio (CIR) fell below 50% or below a 5-year average of 60.31%.
The improvement came partly from higher interest and non-interest incomes and sustaining this in 2024 is crucial, considering the forecast direction of macroeconomic indicators and monetary policy.
For instance, rising inflation and currency volatility may lead to higher interest rates, a situation usually favourable to banks’ loans & advances and interest-based investments.
Analysts believe the group’s improved core financial metrics in FY 2023 should re-establish its tier 1 status in the Proshare Bank Strength Index (PBSI) 2024 and raise its ranking ahead of competitors.
FBNH’s earnings have grown steadily by an average of 41.5% in the past five years, and its price-to-earnings (P/E) ratio sits at 2.74x compared to the industry average of 7.5x.
The price-to-book value (PBV) is below 1 at 0.48x. Analysts expect investors to remain cautious about banking stocks while awaiting their recapitalisation strategies and future earnings projections.
Board of Directors
FBNH’s ability to manage post-leadership changes, whilst emerging as an institutional learning advantage, will continue to be tested; The market watches keenly how this recent change is managed.
With four (4) board members resigning, FBNH’s board members dropped to eight in FY 2023 from eleven (11) in FY 2022.
However, Holdco appointed two directors (non-executive and independent non-executive directors) in Q1 2024, raising the total number of board members to ten (10). Also, FirstBank appointed two (2) new board members, raising the total number of board members to 14 in Q1 2024.
Gross Earnings
FBN Holding’s gross earnings have grown by an average of 19% annually. It settled at N1.60trn in FY 2023, rising by +95.70% from N815.16bn in FY 2022.
The earnings growth came from interest and non-interest income, narrowed down to investment securities, loans and advances, gains from FVTPL (derivatives), and fees and commission income. Interest income had a higher contribution at 60% relative to 40% from non-interest income, reflecting that core operation drove the income growth.
The +153.67% growth in non-interest income to N601.70bn stemmed from net gains from financial instruments at FVTPL (N246.08bn), net gain on sale of investment securities (N34.85bn) and fee and commission income (N226.45bn).
The commercial banking segment remained the lead gross earnings driver, contributing 94%, while Merchant bank and asset management contributed 6%
The persistence of naira depreciation and aggressive rate hikes sustained interest and non-interest growth in Q1 2024.
The group’s gross earnings grew by +181.43% to N730.30bn in Q1 2024 from N259.50bn in Q1 2023. The growth came from higher investments, loans & advances, fees and commission income, and net gains from financial instruments at FVTPL.
Profitability
FBNH’s strong gross earnings translated to profitability as the profit before tax and post-tax profit grew by +126.86% and +127.92% to N350.59bn and N310.37bn in FY 2023, respectively.
The income from sales of investment securities, gains from financial instruments, FVTPL, dividend income, and other operating income cushioned the foreign exchange loss of N332.79bn, personnel expenses growth (+52.58%) and operating expenses growth (+49.59%).
In addition, the group earned N66.34bn from digital banking in FY 2023, +20.41% higher than N55.10bn in FY 2023. This shows an improvement in digital penetration and product usage.
The substantial profit growth nudged earnings per share to N8.59k in FY 2023 from N3.75k in FY 2022. Analysts expect the aggressive rate hike and naira volatility to sustain profitability performance in most of the 2024 quarters.
The group’s profitability tripled in Q1 2024 despite the foreign exchange loss incurred (N94.79bn) and higher operating expenses (+22.49%). The strong earnings translated to profitability, cushioning operating costs and FX exposure. The group’s pre-tax and post-tax profits rose by +325.15% and +315.78% to N238.53bn and N208.11bn respectively.
Financial Position
The group’s financial position improved in FY 2023. The total assets rose by +60.13% to N16.94trn in FY 2023 from N10.58trn in FY 2022, with a distribution of 50% to loans and advances, 17% to Investment securities, and Cash and balances with the CBN at 15%.
Loan advances and investment securities dominating the total assets favour the group, ensuring the continuous inflow of interest income.
The group’s customer deposits rose by +49.68% to N10.66trn, and deposits from banks increased by +70.88% to N1.89trn in FY 2023.
The customer’s deposits have a distribution of 28% current, 27% savings deposits, term deposits at 19%, and domiciliary deposits at 26%; the high savings deposits contributed significantly to the +118.04% growth in interest expense. The group’s shareholders’ funds improved by +75.45% to N1.75trn, driven by a +48.09% rise in retained earnings, +531.43% growth in foreign currency translation reserve, and +35.38% in statutory reserve.
The sudden spike in foreign currency translation reserves is due to the CBN’s directive on prudent management of revaluation gains.
In Q1 2024, total assets climbed to N21.58trn from N11.09trn in Q1 2023. Increased loans & advances, investment securities, cash and balances with central banks drove the growth.
While share capital remained constant, shareholders’ equity rose by +91.44% in Q1 2024 to N1.92trn, driven by a +83.57% rise in retained earnings and foreign currency translation reserve (+1292.46%).
Financial Ratios
FBNH’s key financial ratios improved in FY 2023. Underpinned by improved gross earnings and profitability, return on equity (ROAE) and Average Assets (ROAA) rose to 22.60% and 2.30% in FY 2023 from 14.50% and 1.40% in FY 2022.
The net interest margin improved to 6.10% in FY 2023 as the group earned higher interest income over interest expense. The robust earnings scaled down the group’s cost-to-income ratio to 49.10%, implying better cost optimization.
However, the heightened risk environment weighed on the cost of risk and nonperforming loan ratio, rising to 3.30% and 4.70%, respectively.
The group’s loan-to-deposits ratio increased to 62.20% above the 65% statutory limit, exempting it from discretionary CRR debits.
The group’s financial ratios, especially profitability ratios, stayed positive in Q1 2024, except for the cost of risk and NPL. The return on equity (ROE) and assets (ROA) grew to 45.40% and 4.30%, respectively, with the cost-to-income ratio (CIR) falling to 43.10% from 60.40% in Q1 2023.
Valuation
In FY 2023, FBNH’s Price-to-Earnings (P/E) ratio dropped to 2.74x from 3.12x in FY 2022, reflecting higher market attraction relative to the previous year. The P/B ratio slightly increased to 0.48x but remained below 1, signifying that the bank is valued below its book value.
Share Price Movement
After downward fluctuations in Q1 2023, FBNH’s share price rebounded in April 2023, rising from N11.00k on April 27, 2023, to N23.55k on December 29, 2023. Analysts attributed the share price rally in July and beyond to the battle for ownership between Oba Otudeko and Femi Otedola.
The share price rally persisted in Q1 2024, rising to a resistant price of N43.95k on March 19, 2024. By the beginning of Q2 2024, the share price began to tank, possibly due to investors’ pessimism about banking stocks, considering concerns about bank recapitalisation and falling earnings per share.
The Holdco’s share price finally settled at N22.90k on June 11, 2024, leading to a negative year-to-date (YTD) return of -2.76%.
Peer Analysis: Climbing Along a Steep Ladder
Recapitalisation, consolidation and the emergence of new players in the Nigerian banking industry have shuffled the ranking of banks; some were forced behind as technology-driven ones took the spotlight.
The oldest Nigerian bank was not exempted from the reshuffle; the bank slipped from the fourth position in asset size in 2019 to the fifth position in 2022 and has remained in the position, outran by UBA.
In terms of profitability, FirstBank climbed from 7th in 2019 to 4th in 2023 and 3rd by Q1 2024. The rapid growth was driven by the group’s strategic plan despite the corporate governance struggle.
FBNH’s consistently low dividend payout (hovering below N1) has kept the dividend yield behind that of other industry players.
The group’s dividend yield slumped to the rear end by 2023, with ten (10) banks ahead of the entity, compared to six (6) banks in 2019.
The banking industry saw gross earnings and profitability climb to record highs, benefitting from MPR increases and naira devaluation.
Among the tier 1 banks, Access Holding saw the highest gross earnings at N2.59trn, followed by other two banks with gross earnings above N2trn and FBNH and GTCO with earnings below N2trn at N1.59trn and N1.19trn respectively.
The positions were slightly different coming to profitability, with Zenith Bank taking the lead at N795.96bn, ahead of UBA (N757.68bn) and Access Holding (N729.00bn), while FBNH had a more modest figure at N350.59bn behind GTCO. Analysts noted that despite GTCO being behind FBNH in gross earnings, GTCO was more profitable.
The banks’ high earnings caused earnings per share for most banks to grow to double digits except for FBNH, which had a single-digit EPS of N8.59k. Zenith Bank had the highest EPS at N21.55k ahead of Access Holding, implying that Access Holding incurred higher operating costs, eating into its profit relative to Zenith Bank.
Nevertheless, Access Holding retained its position as having the largest customer deposit at N15.32trn ahead of UBA and Zenith, while GTCO had the lowest tier 1 bank deposit base size at N7.41trn.
GTCO, however, had the highest net interest margin (NIM), return on equity (ROE), and return on assets (ROA).
Also, GTCO was the most cost-efficient financial lender, with a cost-to-income ratio (CIR) of 29.10%, while FBNH was the least efficient with a CIR of 49.08%.
The fundamental valuation of the banks showed that GTCO had the highest price-to-book value at 0.96x, but FBNH had the highest price-to-earnings at 2.74x, while Access Holding had the least at 0.39x and 1.39x, respectively. This suggests that GTCO’s market value reflects its underlying book value and earnings more than its rivals.
Despite the high-interest rate environment, GTCO had a 1.80% cost of funds, significantly lower than its peers, with Access Holding having the highest at 4.90%. However, Zenith had the highest Cost of risk at 7.30%, while Access Holding had the lowest at 1.00%.
GTCO shows better financial health than its rivals based on comparative financial statistics despite having the country’s top six banks’ lowest gross earnings, profit, and asset size.
Closing Thoughts
FBNH’s positive financial numbers would suggest that the internal governance challenges it experienced had a modest impact on its financial performance in FY 2023 and Q1’2024.
To make this sustainable, analysts believe that it is important that the group resolves and tightens its governance architecture to prevent spillover effects in investors’ perceptions and consequently market valuation.
We however do not believe that this will have a significant impact on its capital raising efforts.
Based on FBNH’s banking license, the group intends to raise an additional N300bn in Tier 1 equity (CET 1) either through a public offer or a private placement.
Although the capital raise plan is subject to shareholder approval, market intelligence suggests the group is more than capable of raising these sums from existing shareholders and select entities; and might not therefore proceed with the public offer.
This is however subject to the Holdco’s reading of the recapitalization end-game of competitors; the opportunities related to funding size and actions taken around M&A’s (for which preliminary intel suggests the Holdco would not be involved in merger talks or contemplate a license adjustment).
First Bank’s future starts anew after the industry adjudged the successful tenure of the Adesola Adeduntan era.
Our analysts anticipate HoldCo’s more hands-on involvement in the bank’s strategic direction in this new dispensation.
Nigeria’s annual inflation rate rose to 33.95% in May from 33.69% in April, the National Bureau of Statistics (NBS) revealed on Saturday.
The statistics office said the May 2024 headline inflation rate showed an increase of 0.26% points when compared to the April 2024 headline inflation rate.
On a year-on-year basis, the NBS reported that the headline inflation rate was 11.54% points higher compared to the rate recorded in May 2023, which was 22.41%.
“This shows that the headline inflation rate (year-on-year basis) increased in May 2024 when compared to the same month in the preceding year (i.e., May 2023),” it said.
Meanwhile, the bureau said on a month-on-month basis, the headline inflation rate in May was 2.14%, which was 0.15% lower than the rate recorded in April (2.29%).
This, the report noted, means that in May, the rate of increase in the average price level was less than the rate of increase in the average price level in April.
According to the report, the food inflation rate in May quickened to 40.66% on a year-on-year basis, which was 15.84% points higher compared to the rate recorded in May 2023 (24.82%).
Alhaji Aliko Dangote, the Chairman of the Group, said he would ensure every single Steel used in West Africa comes from Nigeria.
He disclosed this, during an interview at the just concluded Afreximbank’s Annual Meetings in Bahamas.
The ongoing three-day event, which started on June 12, and runs till June 15 in the Bahamas, is jointly with the 3rd AfriCaribbean Trade and Investment Forum (ACTIF).
Dangote said “We are not going to take any break after the success of the Petroleum Refinery, what we are trying to do, is to at least in West Africa, we want to make sure that every single steel that we use comes from Nigeria.”
The African richest man noted that the Continent presents vast opportunities yet to be explored and advised entrepreneurs to be focused on actualizing their dreams.
While encouraging entrepreneurs, he said “First of all, they have to understand what they are doing.
That is, they have to understand the business. Although you can not do everything by yourself. You have to be very very focused, and tough because it is not easy, being in business is not child’s play.
“So you must have the vision right from the beginning and you have to see how you can actualize the vision. We have 1.4 billion people and most of the economies in Africa are doing extremely well.
“So what we need, that is missing, is actually to pay more attention to Agriculture, and Solid minerals. I do not like people to come and take our solid minerals to process and bring the finishing product. We should try and industrialize our continent and that will take us to the next level.”
Meanwhile, in his welcome remarks, Mr. John Rolle, Governor of the Central Bank of The Bahamas, encouraged attendees to capitalize on the opportunities to learn, share, and network.
He mentioned that the Caribbean could benefit from learning more about the Pan African Payment and Settlement System (PAPSS) from Africa.
According to him, with support from Afreximbank, the Central Banks across the Caribbean Community (CARICOM) can work towards replicating that system.
Mr Rolle, said: “A successful project in the Caribbean could keep us on pace to deliver on targets that are already being set for an international payment system that, even at the retail level, is more integrated, faster, and significantly cheaper for the average consumer.
If we perfect the multilateral cross-border payments and settlements arrangement, it could also help us to conserve the use of precious international reserves, especially if we expand intra-regional trade.”
Similarly, Mr Denys Denya, Senior Executive Vice President of Afreximbank, in his remarks, said the AAM and ACTIF2024 were a reunion of all Africans in the context of Global Africa and would help shape the shared vision and aspirations of the Caribbean region and Africa.
Mr Denya said: “For a continent that is endowed with such an abundance of natural resources, the quest for sustainable development has been a perennial struggle. The state of development across the Caribbean region, while not identical, is not quite different from this narrative.
It is in this context of sustained deprivation and marginalization, that we seek to unify our forces in the context of Global Africa for a better future. In our unity, we have the numbers, we have the voice to sit at the table when decisions are made. We are a viable force to influence global decisions.”
In the same vein, Ms Pamela Coke-Hamilton, Executive Director of the International Trade Centre, emphasized the significant trade potential between Africa and the Caribbean, projecting trade to reach $1.8 million annually by 2028. She suggested it is time to explore establishing a free trade area between Africa and the Caribbean.
“Trade agreements are one way to help bring down barriers and open new opportunities,” said Ms Coke-Hamilton
The World Bank has approved two financing facilities of $2.25 billion to support the Federal Government of Nigeria’s efforts in stabilizing the economy.
The approval was announced in a statement titled, “Supporting Nigeria’s Homegrown Reforms: New World Bank Financing for Inclusive Growth and Revenue Diversification”.
The statement read: “The World Bank has today approved two operations: $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation, RESET, Development Policy Financing Program, DPF, and $750 million for the Nigeria Accelerating Resource Mobilization Reforms, ARMOR, Program-for-Results, PforR.
“This combined $2.25 billion package provides immediate financial and technical support to Nigeria’s urgent efforts to stabilize the economy and scale up support to the poor and most economically at risk.
“It further supports Nigeria’s ambitious, multi-year effort to raise non-oil revenues and safeguard oil revenues to promote fiscal sustainability and provide sufficient resources to deliver quality public services.
“Confronted with a fragile economic situation, Nigeria recognized the urgency of changing course and embarked on critical reforms to address economic distortions and strengthen the fiscal outlook.
“Initial critical steps to restore macroeconomic stability, boost revenues, and create the conditions to reignite growth and poverty reduction have been taken.
“These include unifying the multiple official exchange rates and fostering a market-determined official rate, as well as sharply adjusting gasoline prices to begin to phase out the costly, regressive, and opaque gasoline subsidy.
“The Central Bank of Nigeria, CBN, has refocused on its core mandate of price stability and is tightening monetary policy including by increasing interest rates, as is appropriate to reduce inflation.
“A targeted cash transfer program is being rolled out to cushion the impact of high inflation on the poor and economically insecure households.”
Wale Edun, the minister of finance, stated that bold and necessary reforms have been undertaken to restore macroeconomic stability and achieve sustainable, inclusive economic growth, aiming to create quality jobs and economic opportunities for all Nigerians.
Also commenting, World Bank Vice President for Western and Central Africa, Ousmane Diagana, highlighted his support for Nigeria’s RESET and ARMOR programs, noting their role in consolidating macro-fiscal and social protection reforms.
He also highlighted that Nigeria’s commitment to these reforms can stabilize the economy and reduce poverty.
Diagana stressed the importance of sustaining reform efforts to protect the poor and economically vulnerable from cost-of-living pressures.
He further noted that the financing package reinforces the World Bank’s partnership with Nigeria, aiming to strengthen economic policies, create fiscal space, implement tax reforms, and safeguard oil revenues.
“We welcome the support of the RESET and ARMOR programs as we further consolidate and implement our macro-fiscal and social protection policy reforms, consistent with accelerating investment and redirecting public resources sustainably to achieve development priorities.
“Nigeria’s concerted efforts to implement far-reaching macro-fiscal reforms place it on a new path which can stabilize its economy and lift its people out of poverty.
“It is critical to sustain the reform momentum and continue to scale up and expand protection to the poor and economically at risk to cushion the effects of cost-of-living pressures on citizens.
“This financing package reinforces the World Bank’s strong partnership with Nigeria, and our support towards reinvigorating its economy and fast-tracking poverty reduction, which can serve as a beacon for Africa.
“The RESET DPF is focused on supporting Nigeria to strengthen its economic policy framework by creating fiscal space and protecting the poor and economically insecure.
“The ARMOR PforR will support efforts to implement tax and excise reforms, strengthen tax revenue and customs administrations, and safeguard oil revenues,” the World Bank noted.
Wema Bank has successfully concluded the first tranche of its recapitalization exercise, having secured all relevant regulatory approvals for the allotment of its N40 billion rights issue.
Moruf Oseni, the bank’s Managing Director, disclosed this in a statement made available on Friday in Lagos.
Oseni said as a forward-thinking and pioneering bank, the financial institution in December 2023 launched a N40 billion rights issue which had been approved by the Central Bank of Nigeria as well as the Securities and Exchange Commission.
The News Agency of Nigeria reported that CBN, in March, launched a recapitalization programme requiring commercial banks to raise fresh capital.
This is in alignment with the minimum requirement for their respective banking licenses within a 24-month timeline spanning April 1 to March 31, 2026.
The goal of recapitalization is to simultaneously boost the Nigerian economy and strengthen its financial services industry.
Oseni said: “With this remarkable development, Wema Bank has now successfully raised the first tranche of its plan in the minimum requirement laid down by the CBN.
“The bank’s resolve in retaining its commercial banking license with National authorisation and the N40 billion rights issue is a step in that direction.
“Our move to commence our capital raise programme very early demonstrates our push for excellence, and with a strong emphasis on our digital play, we are set to amass more successes in the coming months”
The Managing Director expressed satisfaction with the vote of confidence given by the bank’s shareholders during its first rights issue exercise, noting that its shares were fully subscribed.
Oseni stated that the bank also obtained the approval of its shareholders at its 2023 annual general meeting to raise an additional N150 billion to meet the capitalization threshold set by the CBN.
He hinted that the process was expected to be completed within 12-18 months.
Oseni further stated, “We are committed to providing optimum returns for every stakeholder and the successful conclusion of this N40 billion rights issue is a bold step in the right direction.
“In addition to the upward trend in the bank’s financial performance and the success recorded so far in its recapitalisation exercise, Wema Bank’s corporate rating was recently upgraded to BBB+ by Pan African credit rating agency, Agusto and Co.
“The bank was also retained at BBB by international rating agency, Fitch.”
According to him, over the medium to long term, Wema Bank is positioned to not only dominate the digital banking space but also the Nigerian financial services industry at large as it translates its industry leadership to significant market share.
President Bola Ahmed Tinubu, recently approved the appointment of Mr. Tanimu Yakubu as the Director-General of the Budget Office of the Federation.
Yakubu’s appointment followed the expiration of the tenure of Mr. Ben Akabueze.
The Budget Office of the Federation, situated in the Ministry of Budget and Planning, was established to provide various functions.
This very important ministry is also saddled with the responsibility of catalyzing equitable mobilization and distribution of the Nation’s resources to engender sustainable socio-economic development.
Beyond the above mentioned, it provides efficient and qualitative budget functions to Nigeria, geared towards promoting fiscal sustainability, transparency and accountability in public finance management for national development in line with International best practices.
But what are the critical functions of the Budget Office every Nigerian must know? They are presented below:
1. The Nigerian Budget office is charged with the responsibility of preparing the Executive budget.
2. The Office oversees budget implementation, and budget monitoring.
3. The Ministry of Budget implements fiscal policies of the Federal Government of Nigeria to maintain aggregate fiscal discipline,
4. It also allocates resources in accordance with government priorities, and promotes the efficient delivery of services.
5. The Ministry further performs revenue estimation using current and realistic assumptions on oil production and prices.
6. It also involves estimation of non-oil receipts, and employing realistic macroeconomic indicators to develop a macroeconomic framework used in aggregate fiscal estimates for the Medium Term expenditure Framework.
7. Framework Development for the annual budget is another responsibility of the Ministry.
8. It coordinates the preparation of Medium Term Sector Strategy (MTSS) across the Federal Sector MDAs and ensures that the MTSS significantly drives annual budget estimates with the issuance of Budget Call Circulars (BCC) that clearly links MTEF, MTSS and the annual budget.
The Central Bank of Kenya (CBK), will increase the minimum capital requirement for commercial banks 10-fold to $77.8 million (KES10 billion), Njuguna Ndung’u, Kenya’s minister of finance announced on Thursday.
The new capital requirements will boost resilience to potential financial risks like increased cyber fraud threats and economic shocks, but it could also prove challenging for over half of the 39 licensed commercial banks.
For these small and mid-sized banks, mergers or raising capital from the stock markets are options they will consider.
“The CBK intends to progressively increase the minimum core capital for banks from the current KES1.0 billion ($7.7 million) to KES10.0 billion ($77.8 million). The CBK will engage the market for an appropriate timetable to achieve this goal.
This is intended to strengthen the resilience and increase the bank’s capacity to finance large-scale projects while creating a sufficient capital buffer,” Ndung’u said during the annual budget speech in parliament.
It’s of vital importance to note that this is the second time in a decade that Kenya is pushing to review the minimum capital threshold for lenders.
In 2015, a similar proposal to raise the key capital requirement to $38.9 million (KES5 billion) was rejected by parliament.
CBK requires lenders to maintain a 10.5% floor for the core capital to risk-weighted assets ratio, 14.5% total capital to risk-weighted assets, and 8% for the core capital to deposits ratio. State-owned Consolidated Bank is the only lender that does not meet the current threshold.
The KES 1 billion current requirement has been in force since 2012. This trails the capital adequacy requirement in South Africa ($90 million), Nigeria ($337.1 million), and Egypt ($104.7 million)–the three biggest banking industries in Africa.
Neighbouring Uganda increased its threshold to $40 million (UGX150 billion), which has since seen some banks downgraded including Nigeria’s GTBank, Kenya’s ABC Capital Bank, and Opportunity Bank. Tanzania last reviewed core capital requirements in 2013 and has been mulling plans to raise.
The Securities and Exchange Commission, Nigeria (“SEC”), said the Davido meme coin lack fundamental value and are purely speculative.
The Commission further warned the general public that investing in meme coin, including $Davido, is highly risky and should be done with a full understanding of the associated risk.
SEC said this in a statement signed by its management today, Friday, June 14, 2024, titled “Investor Alert – $Davido Meme Coin Disclaimer’.
The statement reads; “The attention of the Securities and Exchange Commission, Nigeria (“SEC”) has been drawn to a meme coin known as “$Davido” allegedly linked to the popular Nigerian singer, David Adedeji Adeleke AKA Davido.
“Generally, meme coins are cryptocurrencies inspired by memes and internet jokes. They are often envisaged as a fun, light-hearted cryptocurrencies promoted through a social media community and sometimes through celebrity endorsements.
“Meme coins are also NOT intended to serve as a medium of exchange accepted by the public as payment for goods and services, or as digital representation of capital market products such as shares, debentures, units of collective investment schemes, derivatives contracts, commodities or other kinds of financial instruments or investments.
“The general public is HEREBY ADVISED that meme coins lack fundamental value and are purely speculative. The general public is further WARNED that investing in meme coins, including $Davido, is highly risky and should be done with a full understanding of the associated risk.
“Capital Market Operators are by this Notice warned not to associate with instruments that fall outside the SEC’s regulatory purview. Such instruments should not in any manner be distributed or monitored through any capital market mechanism.”
SEC reiterated that the Commission does not recognize $Davido as an investment product or investable asset class under its regulatory purview, as such, individuals who patronize it, do so at their peril.
