How 4 banks raked N309.48bn profit from FG Bonds, T-Bills
…As CBN expects Naira appreciation
…Optimistic on overall confidence index on macro-economy in May
Motolani Oseni
Not less than four commercial banks operating in the country have recorded a total sum of N309.48 billion profit raked from Federal Government of Nigeria (FGN) Bonds and Treasury Bills (T-Bills), The Daily Times checks revealed.
The lenders include United Bank for Africa (UBA) Plc; Guaranty Trust Bank Plc (GTBank); Zenith Bank Plc, and FBN Holdings Plc.
It is, however, worthy of note that the N309.48 billion recorded by the four considered banks was higher by N40.7 billion, when compared to N268.78 billion interest generated from Bonds and T-Bills in the financial year ended in31st December 2017.
Commercial bank investment in risk free business and high yield Investment securities were on a mixed outcome in 2018 over Federal Government plans to reduce its domestic borrowing in favour of foreign borrowing to finance budget.
T-Bills are short-term debt instruments issued by the Federal Government through the CBN to provide short term funding for the government. They are by nature, the most liquid money market securities and are backed by the guarantee of the Federal Government.
Therefore, industry experts believe that in the last five years, commercials lenders in the country have increased their investment in government securities investment, which is contributing to the dwindling loan-to-deposit ratio of some of the Nigeria banks.
However, The Daily Times notes that the commercial banks in 2018 reported a rise in the interest generated from different securities, as yield most especially T-Bills was not attractive due to high inflation rate during the year under review.
For instance, GTBank interest on securities dropped by 8.2per cent from N113.8 billion in 2017 to N104.5 billion in 2018, while Zenith Bank interest on T-Bills and Bond dipped by 0.14 per cent to N152.99 billion as against N153 billion reported in 2017.
But UBA interest on T-Bills investment and Bond rose by 35 per cent to N156 billion from N115.57 billion as FBN Holdings generated N150 billion interest on fixed securities in 2018, 13 per cent below N173.3 billion reported in 2017.
The Central Bank of Nigeria (CBN) had urged commercial banks to increase lending to stimulate the economy or have access to a near-risk-free way of making money choked off.
Members of the Monetary Policy Committee (MPC) at the meeting last week pointed out to commercial banks to get away from parking their cash in high-yielding government securities to divert these funds to the private sector.
Commercials banks in the bore the brunt after sliding crude prices three years ago triggered a surge in bad debts, making the allure of state debt that pays average yields of 14.4per cent more appealing.
“For us to achieve growth, those whose responsibility it is to provide credit must be seen to perform that responsibility,’’ Governor Godwin Emefiele told reporters after a meeting of the MPC in Abuja on Tuesday.
The MPC wants the apex bank “to provide a mechanism” for limiting the ability of banks to put customer deposits into government securities, he said.
Meanwhile, a survey conducted by the CBN revealed that the Nigerian currency, Naira, is expected to appreciate from this month.
The “May 2019 Business Expectations Survey Report” by the apex bank on Friday revealed that “majority of the respondent firms expect the naira to appreciate in the current month, next month and next twelve months as their confidence indices stood at 28.5, 40.1 and 50.1 index points, respectively.”
The report highlighted the power supply, high interest rate, unfavourable and economic climate among others are major business constraints in the country.
According to the report, “The surveyed firms identified insufficient power supply (69.3 points), high-interest rate (56.4 points), unfavourable economic climate (55.2 points), financial problems (54.3 points), unclear economic laws (51.7 points),
the unfavourable political climate (48.3 points), insufficient demand (45.4 points) access to credit (44.4 points), competition (44.0 points) and lack of equipment (33.1 points) as the factors constraining business activity in the current month.”
The apex bank said May 2019 Business Expectations Survey (BES) was conducted from May 6-10, 2019 with a sample size of 1050 businesses nationwide.
“A response rate of 97.0 per cent was achieved, and the sample covered the services, industrial, wholesale/retail trade, and construction sectors.
“The respondent firms were made up of small, medium and large corporations covering both import- and export-oriented businesses.”
On the business outlook for the month under consideration, the survey disclosed that, “At 29.7 index points, respondents expressed optimism on the overall confidence index (CI) on the macro-economy in the month of May 2019.
“The business outlook for June 2019 showed greater confidence on the macro-economy with 62.7 index points.
“The optimism on the macro-economy in the current month was driven by the opinion of respondents from services (15.7 points), industrial (9.7 points), wholesale/retail trade (2.8 points) and construction (1.4 points) sectors.
Whereas the major drivers of the optimism for next month were services (36.6 points), industrial (18.7 points), wholesale/retail trade (4.9 points) and construction (2.5 points) sectors.
“The positive outlook by type of business in May 2019 were driven by businesses that are neither import- nor export-oriented (20.8 points), both import- and export-oriented (5.3 points), import-oriented (3.0 points), and those that are export-related,” the report added.
