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$1tn economy: Mergers, acquisitions loom as CBN plans banks’ recapitalization

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Mergers and acquisitions are on the horizon for Nigeria’s Deposit Money Banks as they prepare for another round of recapitalization, aligning with the country’s target of achieving a $1 trillion economy. The Central Bank of Nigeria Governor, Olayemi Cardoso, recently announced plans to recapitalize DMBs during his speech at the 50th-anniversary dinner of the Chartered Institute of Bankers of Nigeria in Lagos.

Cardoso emphasized the importance of testing the adequacy of Nigeria’s banking industry to meet President Bola Ahmed Tinubu’s economic target. This move follows the floating of Nigeria’s currency, the Naira, against other currencies, resulting in a significant devaluation. The unification of the exchange rate on June 14 prompted the need for a reevaluation of banks’ capital bases.

Eighteen years ago, Nigeria’s banks were recapitalized from N2 billion to N25 billion when the exchange rate was N100/$1. The subsequent depreciation of the Naira to over N780/$1 supports the Central Bank’s decision to pursue recapitalization.

The fate of the country’s 24 commercial banks, particularly those newly established under Governor Godwin Emefiele, raises concerns. Tier 1 banks, including Access Bank, Guaranty Trust Company, Zenith Bank, and United Bank of Africa, demonstrated readiness with a combined capital base of N9.6 trillion at the end of 2022.

However, uncertainties persist about the survival of other banks. The foreign exchange market’s instability, with the Naira closing at N814.60/$1, and rising inflation at 27.33% in October, pose additional challenges to Nigeria’s economy.

Despite these concerns, the President of the Chartered Institute of Bankers of Nigeria, Ken Opara, expressed confidence in the banks’ ability to meet the recapitalization objectives. Industry experts like Idakolo Gbolade and Aminu Gwadabe acknowledge the necessity of recapitalization but suggest a realistic timeframe and careful consideration of economic factors.

Gbolade recommends a capitalization of $10 to $15 billion for banks, emphasizing the need for regional, national, and international considerations to support smaller banks. Gwadabe highlights the impact on the entire economic sector, calling for collaboration and consultation between the Central Bank and stakeholders.

Meanwhile, Prof Godwin Oyedokun from Lead City University acknowledges that bank recapitalization aims to strengthen the financial sector but notes the potential challenges for individual banks in terms of cost and time.

In summary, while the recapitalization exercise is seen as necessary for the growth and stability of Nigeria’s banking sector and overall economy, it is expected to be a complex process with implications for individual banks.

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Multiple Fibre Cuts Bar MTN’s 87m Customers From Calls, Data

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MTN Nigeria has attributed the recent network disruption encountered by its customers nationwide to several instances of fibre cuts.

On Wednesday, the 28th of February, 2024, MTN subscribers encountered difficulties in making calls or accessing data services. The issue reportedly began around 1:39 PM on that day.

In a response communicated through X, MTN Nigeria attributed the network problem to multiple fibre cuts. The company assured its customers that its engineering team is diligently working to restore normal services.

The statement issued by MTN reads: “Dear Customer, you may have experienced difficulties connecting to the network due to a significant service outage caused by multiple fibre cuts, impacting both voice and data services. Our engineers are actively addressing the issue, and services are gradually being restored in some regions. We apologize for any inconvenience caused and appreciate your patience and understanding as we strive to fully restore service at the earliest.”

Funso Aina, Senior Manager of External Relations at MTN Nigeria, echoed similar sentiments, stating, “Our customers have encountered challenges in connecting to the network due to a major service disruption caused by multiple fibre cuts, affecting both voice and data services.”

According to the Nigerian Communications Commission, the number of mobile subscriptions on the MTN network has increased to 87.04 million.

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Binance Addresses Unusual Currency Movement

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The cryptocurrency trading platform Binance has made adjustments to its trading operations to address an unusual movement in currency values. Despite reports suggesting that the Central Bank of Nigeria (CBN) and other government agencies ordered Binance to impose restrictions on Nigerian traders selling USDT, Binance has distanced itself from such claims. In a report published on Wednesday by the Binance Blog, the platform clarified that its peer-to-peer (P2P) product remains operational but with some adjustments.

Binance explained that to safeguard users and prevent potential abuse, their system automatically halts trading during periods of significant currency movement. They noted an instance of temporary suppression of prices that briefly reached their system limit late at night. Prompt adjustments were made to allow trading to continue seamlessly. The platform highlighted their stringent measures to protect users, such as real-time monitoring, immediate removal of non-compliant advertisements, and permanent exclusion of bad actors from utilizing the P2P product. Continuous market surveillance ensures the swift removal of abnormal prices, supported by a fixed security deposit.

Furthermore, Binance emphasized their collaboration with legislators and authorities to uphold transparency in cryptocurrency trading and its impact on financial markets. They underscored that foreign exchange rates are influenced by various complex factors beyond Binance’s control. Despite this, they reiterated their commitment to engaging with regulators, policymakers, and stakeholders to facilitate open and transparent dialogue about managing the evolving cryptocurrency and financial markets landscape.

Binance encouraged users and the community to disregard any unfounded fears or uncertainties and expressed gratitude for ongoing support as they navigate dynamic market conditions. They pledged to provide updates through official channels as necessary.

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Again, CBN Hikes Import Duty Rate To N1,493.23/$1

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Less than a day after reducing the rate, the Central Bank of Nigeria (CBN) increased the exchange rate used for calculating Customs duties at the country’s seaports by 1.4 percent on Saturday morning.

According to information from the official trade portal of the Nigeria Customs Service, the Customs duty rate has been adjusted upwards from N1,472.756 per dollar to N1,493.23 per dollar as of Saturday, February 17, 2024.

This adjustment represents a 1.4 percent rise in the Customs duty rate, resulting in an increase of N20.474 compared to the previous rate.

This move contradicts the directive from the House of Representatives, which called on the apex bank to maintain the Customs and excise duties exchange rate below N1,000 per dollar. The House proposed pegging the rate at N951.941 per dollar, believing that reducing the rate would stimulate activity in Nigerian ports, curb inflation, and enhance economic stability.

The decision to raise the Customs duty exchange rate means that importers will incur higher costs to clear their goods, as import duties are linked to the dollar.

The new rate aligns with the official CBN foreign exchange rate of N1,493.73 per dollar as of Saturday, February 15, 2024, as announced by Customs management.

Earlier this year, the Comptroller General of the Nigeria Customs Service (NCS), Adewale Adeniyi, stated that the Service would solely use the exchange rate from the official Central Bank window for clearing imported goods and would refrain from arbitrarily adjusting the exchange rate.

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