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NIGERIAN BANKING SECTOR ENVIRONMENT Being Discussion Points At A Working Lunch Meeting With EU Ambassadors To Nigeria DR

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NIGERIAN BANKING SECTOR ENVIRONMENT Being Discussion Points At A Working Lunch Meeting With EU Ambassadors To Nigeria DR Powered By Docstoc
					   NIGERIAN BANKING
  SECTOR ENVIRONMENT
                     Being
                Discussion Points
At A Working Lunch Meeting With EU Ambassadors
                   To Nigeria


         DR (Mrs. Cecilia Ibru)   MFR

   MD/CEO OCEANIC BANK INTERNATIONAL PLC



              23rd November 2007
                  OVERVIEW
• BANKING SECTOR ENVIRONMENT IN NIGERIA
• ROLE OF BANK IN THE SUPPORT TO THE PRIVATE SECTOR
• THE PARTICIPATION OF BANKS IN THE SUPPORT TO
  INFRASTRUCTURE
• OCEANIC BANK’S PARTICIPATION IN INFRASTRUCTURE
  FINANCING
• THE SUPPORT OF BANKS TO THE SMEs
• OCEANIC BANK’S SUPPORT TO SMEs IN NIGERIA
• ROLE OF MICROFINANCE MECHANISM IN ADDRESSING
  POVERTY
• NIGERIAN BANKS IN AFRICA
• CONCLUSION
• THANK YOU
   BANKING SECTOR ENVIRONMENT
            IN NIGERIA
• Outcome of Banking Sector Reforms
  – Fewer but Larger Banking Organizations
     • Twenty five banks emerged out of 89 that existed pre-
       consolidation. The 25 banks are larger in terms of asset base,
       shareholders’ funds, deposit base and branch network.

  – Larger Inflow of Capital to the Banking Sector
     • Arising from the recapitalization requirement, a total of =N=360
       billion was raised by banks in addition to total Foreign Direct
       Investment of US$652 million and GBP162,000

  – Improved International Ranking for Nigerian Banks
     • 20 out of 25 Nigerian banks are now in top 100 banks in Africa; 17
       are in the top 40 banks while 4 are among the top 10 in Africa
     • Seventeen out of the 25 banks are in the top 1,000 in the world.
BANKING SECTOR ENVIRONMENT…

– Relative High Capital Base
   • The least capitalized Nigerian bank achieved a capital base of
     about =N=25billion (US$188 million) as against =N=1.3 (US$10
     million) pre-consolidation

   • Aggregate capitalization of the Nigerian banking system rose
     astronomically to =N=932 billion (US$7.3 billion) from =N=311
     billion (US$2.4 billion) prior to the introduction of the consolidation
     program

– Greater Capability to Operate as Universal Banks
   • Banks now have the capacity to engage in the provision of a
     broader range of financial services such as securities underwriting,
     insurance /broker services and real estate/ mortgage financing
ROLE OF BANK IN THE SUPPORT

           TO

    THE PRIVATE SECTOR
                THE PRIVATE SECTOR
• The private sector is a key strategy to boost economic growth
  and development which can reduce poverty by
   – generating employment and income

   – expands public revenues that could be used for better basic
     infrastructure and social services

• Let me therefore begin by expressing, in the strongest
  possible terms, my belief that economic growth and our
  determination for the alleviation of poverty depend on the
  drive of business and commerce.

• When we examine instances where development has
  succeeded, in every case, private sector led initiative was the
  engine of development
                PRIVATE SECTOR…

• That is true because entrepreneur kick-starts a virtuous
  economic cycle;
   – new enterprises are formed
   – new jobs are created
   – new skills are gained,

   – and incomes begin to rise.
• Soon growth and productivity follow;
   –   spurring more innovation and efficiency
   – generating the products and services that people want and
       need.
• And in parallel, people gain opportunity, empowerment, and
  dignity.
                PRIVATE SECTOR…


• A strong private sector does not always emerge by
  itself, especially in developing economies like Nigeria.


• In performing their intermediation role in the national
  economy therefore, Banks are adopting and developing
  strategies to promote private sector development
BANKS SUPPORT TO THE PRIVATE SECTOR

 • Bank’s Key areas of support to private sector development are:

    – Provision of loan and overdraft

    – Private project financing

    – investment promotion

    – investment finance

    – technical support to individual enterprises

    – Support to micro-enterprises (microfinance).
THE PARTICIPATION OF BANKS

          IN THE

SUPPORT TO INFRASTRUCTURE
      GOVERNMENT INITIATIVE ON
          INFRASTRUCTURE
• The Nigerian government has initiated several positive
  changes through Public-Private Partnership (PPP)
   – Funding or operating public service or private venture through a
     partnership of government, and the private sector



• And private players are also more and more
  interested in participating in infrastructure

  development.


• PPP could be in different forms:
         INFRASTRUCTURE INITIATIVE
• PPP Typology
    – Build-own-operate (BOO)
    – Build-develop-operate (BDO)
    – Design-construct-manage-finance (DCMF)
    – Buy-build-operate (BBO)
    – Lease-develop-operate (LDO)
    – Wrap-around addition (WAA)
    – Build-operate-transfer (BOT)
    – Build-own-operate-transfer (BOOT)
    – Build-rent-own-transfer (BROT)
    – Build-transfer-operate (BTO)
•
        INFRASTRUCTURE INITIATIVE
•   Project-based Debt Financing

    – The financing of a long-term infrastructure or an
      industrial project through debt which is repaid using
      the cash flow generated by the operation of the
      project.

    – In form of concessions to the private sector to build
      and operate infrastructure assets.

    – Asset-based debt financing on the other hand may be
      in form of concessions to the private sector to operate
      infrastructure assets
            BANK’S PARTICIPATION IN
          INFRASTRUCTURE FINANCING

Banks play a vital role in the successful implementation of

private infrastructure financing, through a range of services,

that include:
 project evaluation and design, arrangement and placement of funds
  and loan finance,

 The application of banks' specialist skills facilitate development of
  new projects (by increasing the quantity of funds) and improve their
  efficiency (by lifting the quality of projects).
         BANK’S PARTICIPATION IN
       INFRASTRUCTURE FINANCING
 Provide considerable innovation in the organization and
  provision of finance to meet specific problems encountered by
  promoters of private sector infrastructure projects.

 Other supportive areas where the Bank will play a role are
   – the setting up of industrial centers, business advisory services,
     marketing, and training.

   – Provision of capacity support and technical assistance
     programs ;

   – Provision of financial resources to the projects ; and
      Co-ordination of resource transfers from other development
     partners
   OCEANIC BANK’S PARTICIPATION IN
     INFRASTRUCTURE FINANCING
• Oceanic Bank, in line with its focus of building a stronger
  nation is known for breaking new grounds in the market
  for infrastructure finance in Nigeria.

• The bank has ever maintained its leading position in
  promoting    private   sector   development,   social   and
  economic infrastructure development.

• Oceanic Bank has participated with uncommon initiative
  in quite a number of projects in different sectors of the
  economy.
     OCEANIC BANK’S INVOLVEMENT…
• To mention but a few
   – Funding Of The Murtula Mohammed Airport (MMA) Terminal
     2 By Bi-Courtney Ltd – N20billion plus

   – KEPCO ENERGY RESOURCES LTD -
     US$280,000,000(TwoHundred and Eighty Million Dollars)
     Syndicated Facility

   – PORT AND MARITIME INFRASTRUCTURE DEVELOPMENT
      • ENL Consortium Ltd: Oceanic Bank provided facility for
        payment for the terminal D and C at Apapa port

      • Vigeo Limited: Oceanic Bank International Plc provided
        credit facility worth $14.5 million to Vigeo Limited to acquire
        a state of the art anchor handler vessel from Farstad
        Shipping of Norway.
 EU’s Role In infrastructure development In Nigeria
• European Commission, the European Investment Bank (EIB) and nine
  Member States launched the Infrastructure Trust Fund (ITF) for Africa on
  April 23, 2007 in Brussels
   – Signed a memorandum of understanding setting up the trust fund to finance
      infrastructure in Africa

   – The Trust Fund is a financial instrument of the EU-Africa Infrastructure
      Partnership

• ITF Start-up Phase
   – EUR 87 million mobilized for the Fund

   – The EIB made available EUR 260 million in the form of loans.

   – Experts say current investment in Africa's infrastructure needs to double
  EU’s Role In infrastructure development In Nigeria

• Nigeria needs the support of the EU to drive the nation's continuing efforts
   at attaining infrastructural development.
    – Oceanic Bank, remains committed to being at the frontline of activities geared
      towards transforming Nigeria in terms of infrastructural development

    – the EU could take full advantage of the growing pedigree of good corporate
      governance in the banking sector and the increasing involvement of banks in
      public private partnerships and involve Nigerian banks in its activities across
      the African continent
THE SUPPORT OF BANKS TO THE SMEs

           AND



THEIR ROLES IN UPLIFTING INDUSTRIES
  SMALL AND MEDIUM ENTREPRISE
• Small and Medium Industries are believed to be the engine
  room for the development of any economy because they form
  the bulk of business activities in a growing economy like Nigeria

• Governments all over the world have realized that
  developments in SMEs are necessary for

   – employment generation,

   – social entrepreneurial base

   – and encourage the use of local raw materials.

• That has informed the Nigerian government policies to
  encourage, support and fund the establishment of SME’s
CHALLENGES/CONSTRIANTS OF FUNDING
     SME OPERATIONS IN NIGERIA
• Insufficient personal savings/funds resulting in low initial

  promoters' equity

• Uncoordinated business ideas and plans

• Non bankable projects by entrepreneurs

• Inability of the customers (SMEs) to satisfy high credit risk

  standards, including security/collateral

• Inability of banks to provide long-term funds due to mismatch

  between tenor of bank deposits and loans being sought

• Fluctuating and prohibitive interest rate regime, and

• Volatile exchange rate regime.
       INVOLVEMENT OF BANKS IN SMEs
•   Banks involvement in SME’s ranging from

    – the creation or participation in SMEs finance investment fund, to

    – the creation of a special unit for financing SME’s within the Bank

•   Banking Sector services provided to SME, takes various forms such as,

    – Short term loan

    – Repeated loan : where full repayment of one loan brings access to
       another and where the size of the loan depends on the client’s cash
       flow

    – Small loan or bank overdraft facilities to meet day-to-day running
       financing requirement for businesses

    – Factoring and invoice discounting; asset financing and equity
       finance
   OCEANIC BANK’S SUPPORT TO SMES
             IN NIGERIA
• Apart from various products launched to support SMEs, It
  has participated in various projects across every sector of
  the economy.

• Some of the projects the Bank is involved are;

   –   Megito Ventures Limited is one of the SME Project (in
       the Textile industry) of the Bank, which, as a result of our
       funding, has grown to access the NEXIM loan to expand its
       factory capacity under the AGOA (African Growth and
       Opportunity Act
OCEANIC BANK’S SUPPORT TO SMES
          IN NIGERIA
– Industrial Park Development - Partnership with some
 State Government (for example Delta State, Osun state &
 Federal Capital Territory), in the development of Industrial
 parks

– Strategic Partnership with the United States African

 Development Foundation (USADF) to implement the

 Nigerian Small & Medium-sized Enterprise Development

 Program

– Industrial Pack In Lagos to warehouse the major SME

 participations of the Bank
ROLE OF MICROFINANCE MECHANISM
               IN
        ADDRESSING POVERTY
MICROFINANCE AND POVERTY ALLEVIATION
• Microfinance is generally defined as the provision of microcredit
  to low income, micro and small entrepreneurs, mostly in the
  informal sector, who do not have access to the formal financial
  institutions, to help them engage in productive activities or
  improve their small businesses

• Microfinance has attracted a great deal of international attention
  in recent years, as an effective instrument for reducing poverty
  and improving welfare of households.

• Poverty eradication is doable proposition. It can be reduced and
  eradicated with credit as the instrument. Credit is a human right,
  given access to it, the poor can generate income through self
  employment and meet their basic needs
       THE ROLE OF MICROFINANCE IN
           POVERTY ALLEVIATION
• Microfinance can help in poverty reduction by;
   – Improving access to credit to finance viable small/micro business
     ventures in the private sector.
   – Promotion of the private sector as an engine of accelerated
     growth has been identified by the Government of Nigeria as one
     of the major challenges towards development and poverty
     reduction.

• Access to credit by the poor and rural communities could
  raise incomes and thereby improve their living standards.
  This would be possible if the borrowed funds were invested
  in viable income generating projects.
                     Role of EU in Microfinance
•   Africa today, is considered the last investment haven, attracting funds from China,
    the United States and India

•   Recently in Accra, the United States Secretary of the Treasury, Henry Paulson,
    disclosed that the US government through the Overseas Private Investment
    Corporation (OPIC) is injecting about $1 billion into the Sub-Saharan countries

•   All these targeted at poverty eradication and economic inclusion of the economically
    disadvantaged nations in the region

•   The EU can further facilitate the rising profile of microfinance activities in Nigeria
    through the provision of funds to support small businesses across the nation
           NIGERIAN BANKS IN AFRICA

• The Nigerian Banking industry consolidation has produced
    a positive economic multiplier effect that span beyond the
    Nigerian economy to west Africa and other countries in
    the Africa continent.



•   The growth in banking industry’s capital base has
    ensured that Nigerian banks could expand their network
    to countries like Ghana, Gambia, Sierra Leone, and other
    countries in Africa.
                     CONCLUSION
• The Banking sector remains an engine of growth for us to
  realise our dream of becoming one of the rising
  economic powers by 2020
• Economic integration as a key lever for growth in Nigeria
  and the entire African continent
• Poverty eradication as a panacea for global peace and
  prosperity
• The EU should have a greater stake in the burgeoning
  Nigerian economy
THANK YOU

				
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