Top Financial Sector Highlights of 2021
By Dele Ojo
The CBN “Naira 4 Dollar Scheme
The CBN in March 2021, in a bid to encourage more inflows, introduced a new incentive tagged “Naira 4 Dollar Scheme”. In a circular signed by Saleh Jibrin, CBN’s Director, Trade and Exchange Department, said, the scheme would allow all recipients of diaspora remittances to be paid N5 for everyone dollar received.
The naira-for-dollar scheme, which started on March 8, was originally scheduled to end on May 8, 2020. But the apex bank said the scheme would continue indefinitely. With the scheme, diaspora remittance recipients are rewarded with an extra N5 for every dollar wired through the official routes.
The incentive was introduced to shore up remittances and discourage the use of informal windows. The extension of the scheme, which financial experts had dismissed as desperate and unsustainable, comes as the pressure on the naira continues.
As of press time, the naira exchanged for about N490/$ at the black market while the investors’ and exporters’ (I & E) window rate hovers N410/$. Still, the CBN official rate has remained N380/$.
Experts have attributed the manipulation and politicking in the foreign exchange market to the huge differential between the official and parallel markets.
CBN sacks First Bank board, reinstates ousted MD, Adeduntan
The Central Bank of Nigeria (CBN), in April, sacked the boards of First Bank Nigeria Limited and its holding company, FBN Holdco, citing insider abuse and corporate governance breakdown as reasons.The apex bank also set up interim boards, reinstalling the ousted Managing Director/ Chief Executive, Dr. Sola Adeduntan. The interim board chairman of the bank, according to CBN, was Tunde Hassan-Odukale. Other members of the bank subsidiary are Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose, Ishaya Elijah Dodo, Gbenga Shobo, Remi Oni and Abdullahi Ibrahim.
The board of the holding company was chaired by Remi Babalola while the managing director was U.K. Eke. Other members are Dr. Fatade Abiodun Oluwole, Kofo Dosekun, Remi Lasaki, Dr. Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam and Peter Aliogo.
The change was the climax after hours of horse-trading and corporate war over the appointment of a new managing director. The board of directors of First Bank had earlier announced the appointment of Gbenga Shobo as its Managing Director/Chief Executive. Shobo was to replace Adeduntan, who was appointed in 2016.
Following the appointment, the CBN made futile efforts to compel the board to reverse its decision and reinstate the ousted chief executive. The apex bank issued a query to the board when it failed to heed its advice. CBN said the board’s move had a dire consequence for the bank and “portends significant risks to the stability of the financial system” in the query letter.
“The CBN notes with concern that the action was taken without due consultation with the regulatory authorities, especially given the systemic importance of First Bank Ltd.
“The CBN was not made aware of any report from the board indicting the Managing Director of any wrong-doing or misconduct; there appears to be no apparent justification for the precipitate removal.
“We are particularly concerned because the action is coming at a time the CBN has provided various regulatory forbearances and liquidity support to reposition the bank, which has enhanced its asset quality, capital adequacy and liquidity ratios amongst other prudential indicators,” the regulator said.
GTB Transits to Holding Company Structure
In June, Guaranty Trust Bank (GTB) Plc formally transited from its standalone commercial banking structure to a holding company (holdco) structure with the delisting of GTB and listing of the emergent holding company, Guaranty Trust Holding Company (GT HoldCo) Plc on The Nigerian Exchange.
The entire issued share capital of GTB of 29.43 billion ordinary shares of 50 kobo each were delisted from the Daily Official List of the Nigerian Exchange (NGX) Limited while GT Holdco’s entire issued share capital of 29.43 billion ordinary shares of 50 kobo each were subsequently listed on the Daily Official List of NGX at N28.55 per share.
According to the NGX, the delisting of GTB and listing of GT HoldCo on NGX were pursuant to the scheme of arrangement between Guaranty Trust Bank Plc and the holders of its fully paid ordinary shares of 50 Kobo each as approved by the Securities and Exchange Commission and sanctioned by the Court.
Shareholders of GTB had approved the restructuring of the bank to a holdco. The approval paved way for GTB to conclude transition from a standalone commercial bank to a group structure that allows it to invest in other areas of financial services or other businesses.
Managing Director, Guaranty Trust Bank (GTB) Plc, Mr. Segun Agbaje said the adoption of holdco was necessitated because of existing Central Bank of Nigeria (CBN)’s regulations, which require the separation of commercial banking business from other financial services businesses.
He explained that under the new structure, existing shareholders of GTB would be migrated to Guaranty Trust Holdings through a share-for-share exchange between the shareholders of GTB and GTHoldings.
According to him, the overall strategy was to create an operating model that would profitably grow the bank’s presence in the market for commercial banking and non-banking financial services in order to achieve the aspiration to be the dominant financial services group.
“I am delighted over the approval by shareholders for the holding company and I assure the investors of a more rewarding future. The bank will not embark on any share reconstruction as the same number of shares they have with the bank will be maintained,” Agbaje said.
At the court-ordered meeting in Lagos, shareholders approved the transfer of entire issued and paid up capital of GTB totaling 29.431 billion ordinary shares of 50 kobo each to a new company to be known as Guaranty Trust Holding Company Plc. The new company, Guaranty Trust Holding Company (GTHoldings) Plc, simultaneously allot the same 29.431 billion ordinary shares of 50 kobo each to the former shareholders of GTB in accordance with their shareholdings in the bank.
CBN introduces digital currency, eNaira, deepens Cash-less economy policy
In October, President Muhammed Buhari launched Nigeria’s newly created digital currency, the eNaira, in Abuja, Nigeria. The eNaira was scheduled to be launched on October 1, 2021, but was moved due to lots of activities billed for Nigeria’s 61st-anniversary celebrations.
The launch was described by CBN Governor, Godwin Emefiele, as the first in Africa and one of the earliest around the world. Emefiele said, “Mr President, today you make history, yet again, with the launch of the eNaira – the first in Africa and one of the earliest around the world.”
According to Central Bank, the eNaira is the digital form of the Naira, issued by the CBN, and direct liability of the Bank, a legal tender and would form part of the currency-in-circulation and at par with the physical Naira. The eNaira shall complement traditional Naira as a less costly, more efficient, generally acceptable, safe and trusted means of payment. In addition, it will improve monetary policy effectiveness, enhance government’s capacity to deploy targeted social interventions and boost remittances through formal channels.
At the launch, Godwin Emefiele, revealed that the Central Bank Digital Currency (CBDC) eNaira has taken off with over N500m of the currency minted so far while 33 banks have been fully integrated and live on the platform.
At the launch, Emefiele disclosed that over 2.5 million people visit the website daily, and N200 million has been issued to financial institutions.
“Over 2,000 customers have been onboarded and 120 merchants have successfully registered on the eNaira platform, Emefiele ststated.
For prospective users, the eNaira wallet is required to access, use and hold eNaira. The eNaira will be exchangeable for other Central Bank Digital Currencies (CBDC).
In the guidelines released for clarification on the innovation, the Apex Bank explained that the eNaira shall be administered by the CBN through the Digital Currency Management System (DCMS) to mint and issue eNaira, while Financial institutions shall maintain a treasury eNaira wallet for holding and managing eNaira on the DCMS.
The Financial Institution Suite is the primary application used by the financial institutions to manage their digital currency holdings, requests, and redemption with the CBN.
However, the eNaira stock wallet belongs solely to the CBN and it shall warehouse all minted eNaira.
The guidelines stipulate that financial institution may create eNaira sub-treasury wallets for branches tied to it and fund them from its single eNaira treasury wallet with the CBN.
The Nigerian Exchange Group listed on The Nigerian Exchange
Nigerian Exchange Group (NGX Group), which owns and operates the Nigerian Exchange (NGX), was successfully listed on the stock exchange, seeking funds for further expansion of its services.
The listing of NGX Group on the NGX took place on 15 October, putting nearly two billion shares onto the market, and was described as a “milestone” towards the company’s 2018-2021 corporate strategy, in a statement by NGX Group chairman Otunba Abimbola Ogunbanjo.
“Our shareholder base has more than doubled since our demutualisation in March 2021 and our valued shareholders will benefit from the enhanced liquidity that listing on the exchange will facilitate,” he said, explaining that the listing would allow for a much wider range of investors to buy into the company.
The deal was approved by Nigeria’s Securities and Exchange Commission (SEC) and NGX Regulation, the division of NGX responsible for oversight of the exchange.
The demutualisation of NGX Group received approval from SEC in 2018 and was finalised in March this year, with approval from the SEC and the business sector regulator, the Corporate Affairs Commission (CAC).
With passage of the Demutualization Act by the National Assembly, and approvals by SEC and CAC, The Nigerian Stock Exchange (NSE) became the latest exchange to be demutualized. Demutualization is the term used to describe the transition of a stock exchange from a mutual association of exchange members, operating on a not-for-profit basis to a limited liability company, operating for profit and accountable to shareholders. Demutualization in its many forms has become a widespread phenomenon globally since 1993, when the Stockholm Stock Exchange blazed the trail as the first exchange to demutualize.
NGX Group managing director and chief executive Oscar Onyema said the listing would allow the market operator to expand beyond Nigeria: “With strengthening market dynamics, serving the largest economy in Africa, NGX Group’s listing allows us to expand in key capital market infrastructure verticals and look beyond Nigeria’s borders, as we deliver on our growth plans to become Africa’s leading capital market infrastructure group.”
NGX chief executive Temi Popoola said demutualisation and listing “will position NGX Group to provide liquidity to members while stimulating the capital market ecosystem to grow at the same pace as the economy”.
Lagos-headquartered law firm Aluko & Oyebode advised NGX Group on the listing, through a team consisting of senior partner Olubunmi Fayokun, capital markets partner Ayodeji Oyetunde and associate Abisola Akinyemi.
Nigerian investment management firm Chapel Hill Denham Securities acted as stockbroker and provided financial advice, while Lagos-headquartered RMB Nigeria Stockbrokers was joint stockbroker, and its parent company, Johannesburg-headquartered Rand Merchant Bank was also a financial adviser.
The NSE was established by an Act of Parliament in 1960 as a mutual, not-for-profit organization, limited by guarantee of its members. For sixty years of existence, it functioned as a charitable organization, consisting of members but not owners. Its surplus income was not distributable but retained. The situation has now changed because of its new corporate status. It can now make profit, distribute same to shareholders and also pay corporate income tax.
Titan Trust Bank takes over Union Bank
On December 23, Titan Trust Bank the newest national commercial bank in Nigeria, which commenced operation in October 2019 with a strong capital base, it was revealed, strategically bought over the Stallion -Union Bank of Nigeria in a landmark deal between the majority shareholding investor in the 104-year old bank.
An elated Mudassir Amray, Chief Executive Officer, Titan Trust Bank, said: “After completing over two years of operations with aggressive organic growth, we are excited to have an opportunity for a significant leap forward in market share. UBN’s widespread presence, state of the art technology platform, quality staff and strong brand loyalty fits well with our synchronized modular strategy. We look forward to delivering superior results for the benefit of our staff, customers, shareholders, and stakeholders.”
The takeover was revealed by the Board of Directors of Union Bank of Nigeria Plc Thursday, in a message by Somuyiwa Sonubi ,Company Secretary, to the Nigerian Exchange and the investing public that it has received a notification from Union Global Partners Ltd, the holder of majority shareholding in Union Bank, of the execution of a Share Sale and Purchase Agreement between UGPL, certain other existing shareholders of Union Bank and Titan Trust Bank Limited as Purchaser, for the sale of an aggregate 89.39% of the issued share capital of Union Bank held by the Sellers, to the Purchaser.
However, completion of the transaction is subject to obtaining applicable regulatory approvals and the fulfilment of certain conditions precedent.
To Mr. Tunde Lemo, Chair, Titan Trust Bank, “The Board of Titan Trust Bank and our key stakeholders are delighted as this transaction marks a key step for Titan Trust in its strategic growth journey and propels the institution to the next level in the Nigerian banking sector.
The deal represents a unique opportunity to combine Union Bank’s longstanding and leading banking franchise with TTB’s innovation-led model which promises to enhance the product and service offering for our combined valued customers.”
Mrs. Beatrice Hamza Bassey, Chair, Union Bank, while commenting on the transaction said, “On behalf of the Board, we congratulate all the parties involved in reaching this phase of the transaction and the Board looks forward to supporting the next steps to ensure a seamless completion of the process following regulatory approvals.
We are grateful to our current investors whose significant and consequential investments over the past nine years facilitated the transformation of Union Bank, one of Nigeria’s oldest and storied institutions. Today, the Bank is well-positioned with an innovative product offering, a growing customer base of over six million and consistent year on year profitability. This is a solid foundation for our incoming investors to build on as we move into a new era for the Bank.”
On his part, Mr. Emeka Okonkwo, Chief Executive Officer, Union Bank, explained that: “This transaction marks a significant milestone in the journey of our 104-year old Bank. Whilst thanking our current investors for their unwavering commitment to the bank over the years, we welcome our new core investor, TTB. We recognize the strategic fit between the two institutions and expect that this deal will deliver the best outcome for our employees, customers and stakeholders. We look forward to collectively writing the next exciting chapter for Union Bank.”
CBN Bans Foreign Exchange Sales to Burueaux De Change (BDCs)
In a similar fashion to the January 2016 episode, the CBN governor at the end of the July 2021 Monetary Policy Committee (MPC), meeting placed a ban on FX sales to BDC operators and suspended the issuance of new BDC licenses over allegations of FX racketeering. This was followed by a directive to Banks (DMBs) to set up an Foreign Exchange teller desk in all branches to cater to approved FX transactions.
Although this development could help boost the FX and commission income of DMBs (due to increased transactions), we are less optimistic on how it would restore complete sanity in the FX market given the huge FX needs that are met outside the official delineation. Besides, the import-substitution objective of the FG cum CBN which led to the blacklisting of 41 items from accessing FX at the official window in 2016 has not yielded any significant fruit that could help reduce the demand for FX in the parallel market.
In 2016, currency crisis worsened in the aftermath of the ban of FX sales to BDCs, despite the instruction to commercial banks to fill the void. This on one hand was driven by the insufficient FX supply to banks by the CBN, and on the other hand, customers’ apathy to banks’ cumbersome processes. Consequently, demand for FX at the parallel market remained elevated, aided by the large market already created by the CBN’s ban on FX sales to importers of the blacklisted 41 import items. By extension, these fuelled a steep rise in the inflation rate (Jan’16: 9.6% to Dec’16: 18.6%) and the deterioration of offshore investors’ confidence which resulted in large capital flow reversal of 67.2% year on year to US$1.8bn in 2016.
Interestingly, the CBN had in the last 20 months expanded its list of banned items to 45 items (Maize, Fertilizer, Milk, and Sugar being the new additions), while foreign capital inflow declined 61.1% year on year in first half of 2021 to N2.9tn. This is reminiscent of the 2016 trend, especially as the import-substitution objective of the Federal government has not yielded desired results.
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