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Topmost Rating Agency, Moody’s, Says Nigeria Banking Outlook Stable

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Moody’s is keeping its outlook on the Nigerian banking system stable to reflect its resilient capital buffers and stable deposit bases, with high risks likely to subside as the economy is expected to strengthen.

The rating agency stated this in its new report on the African country’s financial institutions.

“Nigerian banks’ asset risk and profitability will remain key rating challenges, but we expect these challenges to gradually decline in 2020 as the economy picks up,” said Peter Mushangwe, Analyst at Moody’s.

“Banks’ funding and liquidity profiles will remain stable thanks to solid deposit bases.”

The key highlights of its report include the fact that non-performing loans (NPLs) will decline to 7% – 8% over the outlook period from 11.7% at year-end 2018 – but still at a high level; and that system-wide tangible common equity will be stable at 16% of risk-weighted assets at year-end 2018, thereby sufficient to bear losses.

The report also pointed out that “banks revenue will be restrained by subdued loan growth while cost pressures, due to IT investments, an AMCON levy2 and higher staff costs, will slow pre-provision profitability.

“Loan quality pressures will ease but remain banks’ main weakness. Nonperforming loans (NPLs) will decline to 7%-8% in the next 12-18 months from 11.7% at the end of 2018 – still a high level. Higher oil prices will constrain new NPL formation while high loan-loss reserves will allow banks to write off some of their bad debts. These credit positives will be moderated by lingering risks from high loan concentrations and high delinquency levels.

“Moody’s expects Nigeria’s real GDP to expand 2.3% in 2019 and 2.8% in 2020, up from 1.9% last year, but well below the level required to improve living standards. Lending growth will recover in the second half of the year following a contraction in 2018, but it will remain subdued and will not appreciably boost banking revenue,” Moody’s Investors Service said in a report published on Tuesday.

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Nigerian newspapers: 10 things you need to know this Saturday morning

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Good morning! Here is today’s summary from Nigerian Newspapers:

1. The Central Bank of Nigeria (CBN), on Friday said that the plan to increase Value Added Tax (VAT) from five per cent to 7.5 per cent is in the right direction to raise the country’s revenue. CBN Governor, Godwin Emefiele said that the government had the responsibility to fend for every citizenry by providing basic infrastructure like roads, electricity and hospitals among others. He explained that the government had only two ways to fund such projects, which are by raising revenue and through loan collection. According to him, the present government has been criticised by some people for high rate of debt incurred.

2. The Governorship Election Petition Tribunal in Taraba State on Saturday dismissed the petition by Abubakar Danladi of the All Progressives Congress (APC) challenging the re-election of Governor Darius Ishaku of the Peoples Democratic Party (PDP) in the last governorship election in the State. In a unanimous decision, the court held that the petitioners failed to prove their claims that the election was marred by irregularities and substantial non-compliance with the Electoral Act.

3. Governors elected on the platform of All Progressives Congress (APC) under the aegis of the Progressive Governors Forum yesterday revealed plans to adopt a common governance initiative across all APC states. The governors said they want to create a distinct identity for the party that will separate it from other political parties in the country. The governors set a PGF Governance Programme Steering Committee headed by the Governors of Jigawa and Plateau states, tasked with the responsibility of looking at how they govern their states.

4. The Central Bank of Nigeria (CBN) on Friday apologised to bank customers for the inconveniences the newly introduced cashless policy will cause. Godwin Emefiele, the Governor of Central Bank, made the apology at the end of the Monetary Policy Committee (MPC) meeting in Abuja. He said he sympathized and regret inconvenience cashless policy will cause bank customers.

5. Rivers-based serial killer, Gracious David-West yesterday said he single-handedly carried out the heinous crime killing a total of 7 victims; 5 in Rivers state, 1 in Lagos and another in Owerri. He however denied being sponsored by any person. He pleaded for mercy, saying that he was been controlled by evil spirit.

6. The Delta State election petition tribunal sitting in Asaba, the Delta State capital on Friday upheld the reelection of Sen. (Dr.) Arthur Ifeanyi Okowa just as it dismissed Chief Great Ovedje Ogboru and the All Progressives Congress, APC’s petition for lacking in merit. The election tribunal headed by Suleiman Belgore handed down the judgment on Friday in Asaba. The Governorship candidate of the All Progressives Congress, APC, Chief Great Ovedje Ogboru had approached the election tribunal, challenging the Governorship election of March 9 which saw Sen. (Dr.) Arthur Ifeanyi Okowa emerging as Governor.

7. Atiku Abubakar, 2019 presidential candidate of the Peoples Democratic Party, PDP, on Friday spoke for the first time since after President Muhammadu Buhari’s victory at the Presidential Election Tribunal earlier this month. Reacting, Atiku in a statement, Atiku urged Nigerians to continue their support for constitutional order via the courts. He also thanked the governors elected on the platform of PDP.

8. President Muhammadu Buhari on Friday reacted to reports of the UN rapporteur on violence in Nigeria. He said while the presidency agree that the violence in Nigeria, or in any country, is a major concern and that there is a rippling effect, it was disappointed that the rapporteur was silent on intra-group violence. He pointed out that in Benue, Taraba, Cross River States and many parts of the country, most of the casualties result from intra-group, inter-group and community violence. Many of the displaced persons across the nation are also victims of these conflicts. Buhari said the UN representative needs to be truthful and even-handed in her assignment.

9. The three-man panel of the Governorship Election Petition Tribunal sitting in Umuahia, the Abia State capital, and chaired by Justice A.L. Ogumoye, on Friday dismissed the petition filed by 2019 APGA gubernatorial candidate, Dr. Alex Otti against the declaration of Gov. Okezie Ikpeazu. The tribunal ruled that the petitioner failed to prove the case of over-voting, non-compliance to the INEC election guideline and electoral act. Alex Otti had asked the tribunal to cancel fifteen out of the seventeen local government areas’ election results in Abia State. Otti claimed that the respondents, PDP, and Governor Okezie Ikpeazu who was the governorship candidate of PDP perpetrated excessive malpractice in those LGAs in the last March 9, 2019, election conducted in the state.

10. A chieftain of the Yoruba apex socio-cultural organization, Afenifere, Chief Ayo Adebanjo, has noted that constitutional crisis in Nigeria and the imbalance in the polity are the main cause of agitation for a break-up by different groups in the country. The lawyer and elder statesman said that it would be better if the country breaks up since the leaders refuse to restructure it. He said he has no objection to breaking up, adding that people are talking of breaking up because the term of coming together has been abrogated by the northern Muslims who are dominating the country. According to him, this is why the young elements, extremists in the South- East, South – South, South –West and the Middle Belt are yearning for break-up.

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Bank customers start payment of charges for deposits, withdrawal of cash

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The Central Bank of Nigeria, CBN, has given an order that customers making cash deposits or withdrawals will pay charges beginning from today in line with its new policy.

The objective of the “transaction fees” is to give vent to the Central Bank’s policy designed to reduce cash in use.

CBN Payments System Management Department Director Sam Okojere on Tuesday announced the take-off of the charges in a statement.

“The transactions will attract three per cent processing fees for withdrawals and two per cent processing fees for lodgments above N500, 000 for individual accounts.

“Corporate accounts will attract five per cent processing fees for withdrawals and three per cent processing fee for lodgments above N3 million.

“The charges will, however, only apply in Lagos, Ogun, Kano, Abia, Anambra, Rivers and the Federal Capital Territory (FCT),” he said.

Okojere said the implementation of the cash-less policy nationwide would take effect from March 31, 2020.

Also to further promote the cashless economy and to enhance the collection of applicable government revenues, the CBN announced a review of the process for merchant settlement.

The regulator has, effective today, approved for banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations.

Okojere announced a downward review of the Merchant Service Charge (MSC) from 0.75 per cent capped at N1,200 to 0.50 per cent capped at N1,000.

“The cash-less policy provides safe and efficient mechanisms for making and receiving payments with minimum risks to the CBN, payment service providers and end-users.

“The cashless payment is catching on to the extent that even the lowly members of the society now do transactions online.

“Without this policy, Nigeria cannot be integrated into the world’s financial system,” the statement read.

Pushing for the full use of the online payment system, the apex bank said for Nigeria to actively play at the world stage, “our payment system must be successfully benchmarked against the global best practices, as in most developed nations of the world.”

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The Americans will see attack on Saudi oil as an attack on them

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One of the two oil facilities struck in the early hours of Saturday morning was recently described by one industry expert as the the Achilles Heel of the Saudi oil industry.

Its size and production capacity makes it a critical part of the global oil supply industry.

It’s not yet clear how much damage was caused to the two plants or for how long production will be impacted, but the Saudi oil minister confirmed overnight a temporary loss of 5.7 million barrels per day of production because of the attacks.

For context, Saudi Arabia pumped 9.8 million barrels per day in August.

The Abqaiq plant was the target of a failed al Qaeda attack in 2006. Since then it has been heavily fortified but is still vulnerable from the air, especially from drones which can bypass air defence systems.

In terms of the impact on the global market and oil supply: well, short term there may be a problem which will become clear when the markets open on Monday morning.

But longer term the gap will probably be bridged by increasing production elsewhere and by releasing reserves into the market.

The much bigger concern now is the geopolitical fallout and the consequence for regional security.



Drone attacks targeted a major Saudi Aramco processing facility and oilfield in the kingdom's east

The US government is in no doubt that the Saudi drone attacks were the work of Iran.

The operation was claimed by the Yemeni Houthi rebel group but they are known to get weapons and technology from their main backer, Iran, who are suspected by other nations to use relatively low-tech ‘attack drones’ as weapons.

With cheap new technologies, small attack or ‘kamikaze’ drones are proving to be disproportionately effective when successful.

Two weeks ago, Israel carried out what they said was a preemptive strike on fighters they said were linked to Iran’s elite Quds Force who were preparing to launch a drone from Syria (where Iran now has a strong foothold) to attack Israel.

US Secretary of State Mike Pompeo said Tehran had launched an “unprecedented attack on the world’s oil supply”, adding that there was “no evidence that the drones were launched from Yemen”.

It’s true that, geographically, the two oil refineries are closer to Iran and Iraq (where Iran has a foothold) than to Yemen.



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Who launched the drone attack against Saudi oil facilities?

The Americans have always blamed Iran for stoking the flames of the Yemen conflict. But the drone attack represents, in US government eyes, an attack on global energy supply which they’ll interpret as an attack on them.

“We call on all nations to publicly and unequivocally condemn Iran’s attacks,” Mr Pompeo tweeted. “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”

In such a chaotic and delicate region, an attack of this type is very dangerous.

Donald Trump has been hoping to meet Iranian President Hassan Rouhani in his latest attempt at rapprochement (after limited success with North Korea’s Kim Jong Un and no success with Afghanistan’s Taliban).

Last week he fired his national security adviser John Bolton who was calling for a much harder line on Iran.

While Mr Bolton sits out of office no doubt saying “I told you so”, President Trump must now be pondering the merits of the proposed meeting with the Iranian president.

His own secretary of state seems clear: “Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy…”

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