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Banks ready to impose charges on cash deposits

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In line with the Central Bank of Nigeria (CBN)’s recent review of the cashless policy, which resulted in the reintroduction of charges on some categories of cash deposits and withdrawals, banks across six states- Lagos, Ogun , Kano, Abia, Anambra, Rivers- as well as the Federal Capital Territory (FCT), are getting ready to begin implementing the policy.

Findings by New Telegraph revealed that in recent weeks these banks have increased the number of emails and text messages that they have been sending to their customers to inform them that the reintroduced charges would soon come into effect.

It was also gathered that the lenders have trained their staff on how they can patiently explain the development to customers.

The head, Lagos branch of a Tier 2 bank, who spoke on condition of anonymity, said: “We know things are difficult for most people because of the tough economy, so most of the customers are likely to lose their temper when we inform them about the reintroduced charges. The option we have is to keep our cool and not allow ourselves to be provoked.”

According to the CBN, as from April 1, bank customers in the six states will have to pay charges if they are depositing and withdrawing cash amounting to N500,000 and above.

Specifically, for cash deposits between N500,000 and N1 million, the customer would pay a 1.5 per cent charge while the charge for withdrawal is two per cent of the amount.

Similarly, for cash between N1 million and N5 million, while deposit attracts two per cent of the amount, bank customers making withdrawals within the range would have to pay three per cent charge. For cash above N5 million, deposit attracts three per cent charge while withdrawals is 7.5 per cent. On the other hand, for corporates with cash less than N3 million, for deposit and withdrawals, there would be no charge.

But firms with cash between N3 million and N10 million, depositing such would attract two per cent charge, while withdrawals would attract five cent of the amount when the policy takes off.

Also, for cash between N10 million and N40 million withdrawn from a corporate account holder, three per cent would be charged for deposit and 7.5 per cent for withdrawals. For cash above N40 million, deposit is five per cent and withdrawals is 10 per cent.

Interestingly, when it was originally launched in 2011, the Cashless policy had stipulated that banks should impose charges on cash deposits of N500,000 and above. However, this was stopped shortly after the current CBN, Governor, Mr. Godwin Emefiele assumed office in June 2014.

He had explained then that the apex bank took the decision to scrap the charges because it believed that a zero charge on deposits would encourage investment attitudes among the savers. He further pointed out that during the course of the cashless policy pilot scheme in Lagos State, a lot of complaints were made by customers, particularly regarding the charges being imposed for cash deposits.

This, according to him, resulted in customers devising various means to avoid the charges such as opening of multiple accounts and other disingenuous behaviour with the aim of undermining the objectives of the policy.

However, last February, the CBN, in a circular to lenders, announced the reintroduction of the charges as well as a general review of all deposit and withdrawal charges under the cashless policy.

According to the circular, which was signed by the Director, Banking and Payment System, CBN, Mr. ‘Dipo Fatokun, the Bankers’ Committee, at its 493rd meeting held on February 8, 2017, reviewed the cashless policy charges on withdrawal and deposit and decided that the policy should be extended to the 30 remaining states of the federation.

While it would come into effect from April 1, 2017, in the existing cash-less states (Lagos, Ogun, Kano, Abia, Anambra, Rivers and the FCT), the policy will be implemented with the charges taking effect on May 1, 2017, in Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun and Plateau States according to the CBN.

The policy would be executed with the charges taking effect on August 1, 2017, in Edo, Katsina, Jigawa, Niger, Oyo, Adamawa, Akwa Ibom, Ebonyi, Taraba and Nasarawa State.

The CBN further stated that the income generated from the processing fees charged above the allowable cash transaction limits shall be shared between it and the banks in the ratio of 40:60.

It, however, explained : “Existing exemptions remain sustained for revenue generating accounts of the federal, state and local governments (lodgments only). Embassies, diplomatic missions, multilateral and aid donors in Nigeria are also exempted from all processing fees relating to the cashless policy implementation.”

It would be recalled that following the CBN’s announcement of the reintroduction of the charges last February, this newspaper had reported that some bank customers in Lagos were opposed to the move.

A spare parts dealer, Mr. Tochukwu Orji, said he found it difficult to comprehend why a bank should want to penalise him for making cash deposits above N500,000 especially in this difficult time when so many businesses are closing shop. He expressed fears that the development could lead to more customers dumping banks for Ponzi schemes.

He said: “I was told the reintroduction of the charges is part of the CBN’s efforts to promote its cashless policy; that they want to encourage people to stop carrying large amounts of money about and instead to use electronic payment channels such as Point of Sales (PoS), Automated Teller Machines (ATMs) and so on, to transfer funds. But they are not going about it the right way.”

He argued that many businessmen and women still prefer carrying cash because they have had unpleasant experiences where they could not immediately seal a deal because available electronic payment channels were having network issues.

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Business

N196.19bn insurance budget stirs mixed feelings

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A brighter prospect appears to be in the offing for Nigerian insurance sector considering the amount budgeted by the Federal Government to meet the life assurance premium obligations of ministries, departments and agencies (MDAs) as well as that of pensions and gratuity payment to public servants.
The amount put at N196.19 billion, is expected to spur activities in the industry the moment it is released and disbursed.

The breakdown shows that while N181.19 billion has been allocated for the payment of pensions and gratuities of public servants, N15 billion has also been set aside to meet MDAs’ life assurance premium obligations.
President, Chartered Insurance Institute of Nigeria (CIIN), Mrs. Funmi Babinton-Ashaye, believes that based on the budget, the insurance sector should experience increased business momentum.

According to her, “on the whole, the insurance industry, in my view, has more to cheer from the budget. In other words, the business outlook for the insurance industry is mixed but very promising. As players and risk managers, we need to open our inner minds and take those business decisions that will help us reposition of industry in the unfolding 2018 business year.”

The prospect is, however, dependent on government’s willingness to release the premium considering the fact that it remains one of the biggest debtors to the industry.
Series of events in the past had revealed the unwillingness of the authorities to fund insurance cover for public servants, thereby denying them or their family members any form of compensation in the event of an incident.
New Telegraph recalled that last December it was revealed that the Federal Government only paid 62 per cent premium for 2016 cover, leaving a balance of 38 per cent while it was yet to pay any for 2017.

Lamenting government’s failure to urgently pay premium for its workers, an insurance broker, Tunde Oguntade, revealed in Lagos that apart from not paying the premium in full, it was also delayed for an upward of four months from August to December 2017 before 62 per cent of the sum was paid to the selected brokers.

The group life policy is in compliance with Section 4 (5) of the Pension Reform Act, 2014, which states, “every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.
At the beginning of 2017, a sum of N22.4 billion was budgeted as premium for the Presidency, and MDAs.

Out of the amount, the Federal Government’s life insurance had a provision for N15 billion, being the highest figure for insurance premium.
A breakdown of the amount showed that while about N22.4 billion would be spent on insurance premium, Ministry of Agriculture and its parastatals would make do with N1.9 billion.
Although the Federal Government had been slow in paying premium for both life and general insurance, the Office of the Head of Service of the Federation had hinted of the need to review the benefit of group life cover herein the insured only benefits when he is dead.

A top official of OHCSF was quoted to have lamented that the current Group Life scheme was not in tune with global best practices and as such, failed to benefit civil servants across the federation as expected.
He said the only benefits civil servants received from group life scheme was death benefit, whereas it could be extended to accidents, disabilities, residual benefits and other ancillary services.

According to him, government will review the current Group Life Assurance Scheme from an annual policy to a long-term policy for effectiveness and efficiency in order to address these drawbacks, enhance the benefits derivable from the scheme and bring the Group Life Insurance Policy in line with global best practices.

He said: “It is usually N5.4 billion annually for civil servants Group life insurance. That’s the figure and that had been recurring for the last three or four years. For this current one, I think we shortlisted 21 insurance companies, but the BPP gave us certificate of no objection for 20 and 108 insurance brokers.
“We can only work with those approved by the BPP and that approval had been confirmed by Mr. President.”

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Business

Stock market advances on blue chip firms

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The bulls maintained their grip on the market activities as stocks sustained rally following gains recorded majorly by banking and consumer goods stocks. The key market performance measures, the NSE All Share Index and market capitalisation, rose by 0.23 per cent as market sentiments extended gaining streaks following investors’ sustained optimism.

Consequently, the All-Share Index gained 100.46 basis points or 0.23 per cent to close at 42,258.78 as against 42,158.32 recorded the previous day while the market capitalisation of equities appreciated by N36 billion or 0.23 per cent to close at N15.165 trillion from N12.129 trillion.Meanwhile, a turnover of 342.1 million shares exchanged in 4,943 deals was recorded in the day’s trading.

B anking sub-sector of the financial services segment was the most active (measured by turnover volume) with 196.8 million shares exchanged by investors in 1,942 deals. Volume in the sub-sector was largely driven by activities in the shares of Fidelity Bank Plc and Skye Bank Plc. Premium sub-sector boosted by activities in the shares of Zenith Bank Plc and FBNH Plc trailed with a turnover of 50.1 million shares in 738 deals.

The number of gainers at the close of trading session was 24, while decliners closed at 17. Japaul Oil Nigeria Plc led the gainers’ table with a gain of 5.41 per cent to close at 39 kobo per share, while Wapic Insurance Plc tailed with a gain of 4.92 per cent to close at 64 kobo per share. Total Oil Nigeria Plc added 4.78 per cent to close at N228.00 per share.

On the other hand, Unic Insurance Plc led the price losers’ table, dropping 6.67 per cent to close at 28 kobo per share. Courtiville Nigeria Plc followed with 5.56 per cent to close at 34 kobo per share, while AG Leventis Nigeria Plc trailed with a loss of five per cent to close at 57 kobo per share.

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Business

Global markets fret over next leg of treasury selloff

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While investors focus on soaring yields on U.S. bills and the 10-year note, global markets may be at the mercy of a fresh threat: a rising term premium, or the extra compensation to hold longer-maturity debt over short-term securities. According to Bloomberg, strengthening price pressures as the economic upswing intensifies in concert with diminishing monetary stimulus look poised to awaken duration risk from its post-crisis slumber, according to strategists and investors.

Add the prospect of diminished foreign appetite for U.S. debt, and upward pressure looks set to intensify on the Treasury metric, which influences valuations for risk assets around the world from stocks to emerging-market debt.

“Term premia are likely to rise even if the Fed has a tendency to flatten the curve by raising rates potentially more than the market has been currently expecting,” said John Stopford, the head of multiasset income at Investec Asset Management, which oversees $141 billion, on Bloomberg TV this week.

“Volatility is something we haven’t yet seen much of yet but I expect to see more in Treasuries.” One estimate of the gauge by the Federal Reserve Bank of New York remains in negative territory after rising to May 2017 levels earlier this month amid the global rout before easing.

To bond bears, that suggests the worst may be yet to come. Market distortions wrought by monetary stimulus are receding while U.S. growth gathers pace, setting the stage for higher longer-dated premiums as early as the second half of the year, according to Goldman Sachs Group Inc.

“We find that U.S. term premium should increase as the economy progressively overheats,” strategists led by Francesco Garzarelli wrote in a recent note. While Wall Street has long warned that this estimated metric is set to rise from depressed levels, its current gap with the advancing economic cycle looks unsustainable, according to Goldman Sachs

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