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Enelamah: Nigeria’s economy can’t stand on one leg

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Minister of Industry, Trade and Investment, Dr. Okechuckwu Enelamah, talks about efforts being made by the present administration to reset the Nigerian economy back to the path of sustainable growth. He spoke in Abuja with select journalists. Abdulwahab Isa was there. Excerpts :

 

 

What value addition would the Nigeria Office for Trade Negotiations give to Nigeria’s international trade position?
The Nigerian Office for Trade Negotiation (NOTN) has just been approved last month by the Federal Executive Council ( FEC). Why we decided to go in this direction is because trade is a very specialized area and it is becoming very technical and we found out that in order to put our best field forward when it comes to trade and trade negotiation; we need a body of experts, we need good experts to lead our negotiations.
Nigeria office for trade negotiation is just being setup now; it’s being approved and it would be operational in the next few weeks. The whole idea is that, it would be led by a Chief Negotiator and Trade Advisor. We have a candidate already but we would also have experts on trade from this ministry and other ministries that would advice the country and the Ministries Departments and Agencies (MDAs) on trade.
Basically, some of the areas we will be looking at would be just thinking prospect. We are looking ahead, and we think that the Continental Free Trade Agreement (CFTA) is sorting out our relationship with the Economic Community of West African States (ECOWAS) and Europe with the Economic Partnership Agreement (EPA). We are also looking at some of the agreement we’ve entered into already like CET and ETLS. We would also be looking at the relationship with Europe in terms of Brexit and the likes. We will also be looking at some of the so-called Free Trade Agreement, or strategic trade agreement to help to create value chains, global value chains and regional value chains.
What that means essentially is that you are entering into agreements with other countries on how you add value to products that come to them, the way you are part of the total picture for producing finished goods. It is really trying to ensure that we go beyond passive trading to adding value in our trade relationships and i think you will find out that it also ties into all the other policies of government, made in Nigeria or made in NAIJA or buy NAIJA because what you are trying to do is to increase value added in Nigeria.
It also ties into the Economic Recovery and Growth Plan, which is essentially about creating jobs, about agriculture, agro processing and agro value chain and about industrialisation.
It also ties into our emphasis on SMEs; because SMEs ultimately need help from their countries and their governments to make sure that their products are adding as much value as possible and are getting the best price possible . The price between value added products and raw products is dramatic. This is why in Africa, we’ve often suffered from selling raw materials and the commodity circles and the burst boom circles. I think the Nigerian Office for Trade Negotiation will be very helpful in addition to what we are doing already.

Nigeria has been having trade negotiations and entering trade agreements all this while. What is the importance of NOTN.
There are many reasons. We have been suffering what we call the ‘coordination deficit’, which means we are not well coordinated as a country in terms of trade negotiations. It basically means that the level of coordination has being poor in different MDAs of government when it comes to trade.
Trade is a very wide-ranging subject as you know and different people conduct trade in different shades and forms. As a country, we need to have common positions on trade. Now related to that coordination deficit, is this idea of agreeing on what are those common positions and having a repository or a place where they fully understand our strategic positions on key issues so that thing we are coordinating support the different agencies. So, we are speaking with one voice as a country.
A country needs to have a strategic direction. Look at the ERGP for instance, what does it means for trade? Somebody needs to master that and make sure that we enter into negotiations in line with the plan.
The need for expertise makes NOTN imperative. Rather than trying to reproduce expertise in every agencies and departments, there is certainly synergy and it makes sense to have experts that you keep training and helping them to stay current.
This is not unique to Nigeria. Other countries have done it as well but the important thing is that by so doing, it strengthens our position, it doesn’t weaken it. In the past, we’ve had trade agreements that have not really been properly completed and implemented. Having people who work with the various operational agencies, department and ministries of the government, It is a lot easier to follow through and being able to understand all what our commitments are.
They will also build a data base agreement. There are several other reasons but these are the more important ones.

Will the Office be a pool or you will only train experts and still leave them to remain in their various MDAs?
It’s going to be an agency of the government that is focused on trade negotiation; it is called Nigeria office for Trade Negotiation. And we would have a limited number of experts. Some people are of the opinion that Nigeria lacks expertise to negotiate trade agreements in her favour.
The gentleman who is leading this efforts, Amb. Chidi Osakwe has been at the World Trade Organisation (WTO) for close to 20 years. Before then, he spent about 15 years or more in Foreign Service. He is a trade expert and understands the technicalities and the language of trade. There are other people who have received similar training and exposures. Part of what we are doing now is to identify them and pool them together. We will also be undertaking training and equipping others with tools of negotiation.
We are going to be training people, we are going to be helping them get the necessary exposure and the necessary skills and tools for negotiations. ‘Yes’ and ‘No’ is not negotiation.
That is the elementary form of negotiation. In fact, most people would tell you, get into saying ‘yes’ or everything is negotiable. I used to be a student of negotiation myself. So it is not about saying ‘no’. In fact, negotiation teaches you that ‘no’ is not the answer to negotiation; the answer to negotiation is ‘what do you want?’. The person that says ‘no’ hasn’t said what he wants and people always want something and negotiation is the process of getting what you want and that is what we would be doing.

What is your strategy on the Ease of Doing Business as this administration tries to diversify the economy?
Our strategy as a country is to diversify away from oil. Not that oil is not important, but we cannot stand on one leg. We are blessed to have oil. But we cannot depend on one commodity. Therefore in order to diversify away from oil, we need to address other areas, especially industries, services and SMES to get into different businesses and trade.
Without any iota of doubt, what government needs to do to make it easier for people to do business is to create the right environment, to lower the cost of doing business; to make the process of getting approvals easier. That process is what this whole focus is.
We are saying let us diversify in theory; we are taking practical steps to make economic diversification a reality.
Government has been working on the Ease of Doing Business since last year when the president launched the Presidential Ease of Doing Business Council. The vice president, chairs it with some of ministers, 10 ministers – the Governor of the Central Bank of Nigeria and the Head of Service. It has a secretariat called the Enabling Business Secretariat and it has been working on several initiatives on how to ease doing business in Nigeria.
In fact, it came up recently with the 60-day National Action Plan to deal with business registration, construction permit, trading across borders and the likes so that we can improve on our Ease of Doing Business rating. This will enable people view our country as a business-friendly environment.
The Executive Orders were passed as an extension of this work. Two weeks ago, the Acting President signed three Executive Orders: Executive Order 001 was on Transparency and Ease of doing Business. The purpose of that executive Order is to make the system wide. Every agency of government should be very clear on what people need to get approvals in terms of time requirements, fees to be paid and where a person can expect an approval or a rejection. Those should be published on their websites and public places so that people can be aware.
The second leg is on the modalities for approvals provisions. What it provides for is that, for any reason you don’t get back to the people. What it means is that silence is consent. Therefore, the onus is on the public servants to tell people why they don’t qualify for something rather than the other way round where you don’t hear from me, it means you don’t qualify. It is a clear signal to the public that we’re here for you. That we are here to render service. It is a clear signal that the government is the government of the people, by the people and for the people.
Number three goes further and deals with the principle of one government. What that means is that, if you are getting an approval from a government agency or department and there is something that is required and the original copies of the document are in another government agency, that original agency should take the responsibility to get it from the other agency because we are all agencies of one government, rather than telling the applicant to go and bring.
All you need to do is to provide evidence that such a document exists. It could be a photocopy or any other thing and the other agency would liaise with the other. You know when the government agencies liaise with each other; they are a lot more supportive of each other. The whole idea is to make it easier to do business.

How is government really going to ensure that these things are carried out?
Let me start by quoting the acting president when he addressed civil servants last week (penultimate week). He said it’s a new day. It’s only a person who is insensitive, inattentive or unwise that will treat these executive orders as business as usual. As I speak to you today, there is another session going on with the senior civil servants explaining how the orders will work or operate. They are brainstorming and working on it. So, the first thing today is that these are rules and regulations of engagement of government and the civil servants understand the importance of rules.
Number two is the reason why we are having meeting like this to make the public be made and the citizens are empowered with information and understanding of their right so that they, in effect, can demand those services, because that is what the law says.
The third thing to say is that, like if you read the executive orders carefully, they include sanctions and consequences and who is responsible. For instance, it says each authority, the head of that agency would be held accountable and I can tell you that in my ministry, we have already met to talk about how to implement.
There is no need of enlisting task force implementing bodies; there are a number that are already doing that. There is an agency of government called SERVICOM that is clearly there on how to provide service to the public.

Can you explain how this ease of doing business will work at the port?
That’s executive order 001 and one of the first things I would say is that the media especially would need to understand the orders and publicize them. What the executive orders says exactly about ports is that there shall be no touting whatsoever by officials or unofficial persons at any port in Nigeria and all non-official staff shall be removed from the secured areas of the airport, those are directives, rules, commands given to people. So, if you see somebody who is not an official, already they are breaking the rules and you have every right to report it.
Another one is that, any official caught soliciting or receiving bribes from passengers or other port users shall be subject to immediate removal. We need citizen activism and it is serious. Our citizens tolerate far too much. Why would somebody extort money from you against the rule and you can’t do anything?
It says any official caught soliciting or receiving bribes from passengers or other port users shall be subject to immediate removal from posts and disciplinary as well as criminal proceedings in line with extant laws and regulations. Merge departure and arrival interfaces at the airport into a single customer within 30 days without prejudice to necessary back end procedures. It also says, harmonise operations of all MDAs of government physically present at the port into one single interface – meaning station or desk domiciled in one location in the port and implemented by a single joint tax force at all times without prejudice to necessary backend procedures within 60 days. It also says assign an existing airport terminal, to be dedicated to the exportation of agricultural produce.
This is about single window and single interface as well, trying to leverage technology to make sure that all the people who have responsibilities in the port can do it electronically, through a portal.

Has this order come into operation?
You just heard when I said 60 days and 30 days. It has been signed, we have started counting already.

What is government doing about expatriate quota?
The point is that we have a responsibility to ensure that we control influx of people in a way that is responsible without becoming an island nor adversarial especially for countries like China who have indicated very clearly that they want the good of Africa and Nigeria. They said if you don’t have funds, we have surplus funds and we will give you. It’s an act of friendship and it has to be accepted; and that is why the president said that China is friend of Nigeria because we are trying to rebuild our infrastructure. The infrastructure he met when he was here in the 70s were good and the president’s vision is for us to return or do better than that. If you look at the money involved, you are talking about tens of billions of dollars to build up our railways across Nigeria; our highways and power sector and the Chinese have said they would support that, that is fine, nothing against it.

What is government doing about our export rejects especially to Europe and US?
One thing about trade export is, we live in a world where you have to be competitive and you have to give the world acceptable products. Everybody has a right to export without sort of meeting the baseline, that is one point. The second point is, there is also a lot of gamesmanship that goes on – what they call non-tariff barrels where they come up with barriers to trade, where they come up with rules. We have to be proactive in engagement. Trade is about engagement, which is why we need our trade experts to engage our markets. Markets are not impassible and they will point out what is wrong, but I believe that it is that engagement that leads to the successes. So, I think the thing to understand is that it is more trade engagement, more negotiation; it is not a matter of being passive . The government has some role and the quality assurance certification bodies have a role to make sure that what we are exporting meets standards.

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Interest rates cut likely at MPC’s meeting in 2018 –Aigboje

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Managing Director, Capital Bancorp Plc, Mr. Higo Aigboje in this interview with Chris Ugwu, speaks on the financial services sector and the economy and concludes that there is a possibility of rates cut in 2018. Excerpts:

 

 

What is your take on the financial market?
The Nigerian financial market performance in 2017 was more stable than the previous year using some economic and market indicators as yardsticks.
Unlike the previous year where only the money and bond markets were active as a result relatively high interest rates occasioned in part by the ever increasing inflation rate and federal government’s appetite for borrowing, the stock market had its fair share in the upbeat with the stock market index closed northward and ranked as the third best performing stock market of 2017 globally.

The Foreign Exchange market experienced some level of stability owning to CBN’s actions on introduction of Investors’ and Exporters’ Window and CBN’s direct intervention occasioned by the accretion to the foreign reserves from oil revenues.
The banking industry also saw some level of better performance as some of the banks were able to latch on the opportunities in Nigerian Treasury bills in the year. The banks also saw an improved provisioning as a result of the improved performance of some of their debtors in the year.

Do you expect the gradual recovery in the economy to gain momentum this year?
In what we describe as a fair outing for the Nigerian economy in 2017 having come from a difficult year in 2016, I think the country looks poised to record better performance in 2018. In the early part of the year, the International Monetary Fund (IMF) projected a growth rate of 0.8 per cent while the World Bank projected a growth rate of 1.00 per cent for 2017.

Recent forecast by both bodies have maintained their initial growth forecast for the country. However, we are more bullish as we maintain our growth estimate of 1.5 per cent for 2017. Growth in 2018 was projected to significantly improve on the back of firming oil prices, improved foreign exchange liquidity, rising government revenues and increase in the government spending.

Going from the third quarter 2017, GDP report released by the Nigerian Bureau of Statistics (NBS), the non-oil sector of the Nigerian economy needs to report signs of a recovery for growth to reach levels seen before the oil price decline as consistent negative growth in the non-oil sector will continue to remain a drag on the overall growth potential of the Nigerian economy.

I also hope that appropriate policies, both monetary and fiscal will be put in place in 2018 to drive economic growth. I think also that the Federal Government will rapidly pass the 2018 Budget into law and execute the projects in desirable time to boost economic activities. 1 am of opinion that if the government rides on the current events, which presently are in the favour of Nigeria, the country will grow by an average of 2.2 per cent in 2018, despite downside risk to this growth forecast.

So, what are the downside risks to Nigeria’s GDP growth?
The projected GDP growth rate for 2018 should become a reality if the government continues to boost its non-oil sector revenues and properly deal with issues relating to wasteful government spending and non-friendly business policies.
Some of the downward risks to GDP growth also include a sudden decline in oil prices due to increased production from exporting countries; a sudden rise in insecurity and insurgency, which may disrupt economic activities in Nigeria; improper management and use of its foreign reserves, which would lead to further depletion and cause FX volatility and lack of clear and proper fiscal policies to drive different sectors of the economy.

The trending patriotic policies by advanced countries may also hamper inflow of both Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) even as some advanced countries have reported a rise in interest rates.

Looking at how some banks fared in 2017, do you think they will continue to return profits in 2018?
The Nigerian banking sector has remained one of the most vibrant and delicate sectors in the Nigerian economy especially as it has the capacity to send shock waves round the economy if it fails.
The sector has since 2015 continued to suffer significant headwinds as the CBN monetary policies and economic realities have continued to hamper its ability to significantly grow profits. However, most of the Tier-1 banks have been able to surmount these headwinds and have continued to surpass expectations even in the face of the unfriendly business environment and hostile business policies.

2017 saw the banking sector continue to post bumper earnings especially for most of the Tier-1 banks and a few Tier-2 banks. The rest of the group have continued to battle with high level of loan impairment, which has eaten deep into their operating profit and dampened their ability to grow their bottom line.

Non-Performing loans as at June 2016 stood at 11.7 percent and rose to 12.8 as at December 2016 with a large portion of the rise attributed to the banks in the Tier-2 space. The CBN may need to increase its oversight of the credit and approval process of the tie-2 banks in a bid to limit the rising NPLs.

The banks in 2017 are also expected to report higher interest income on the back of the high interest rate environment observed during the period while we expect an increase in cost to income ratio for the period.
Going forward, the banking sector is expected to remain robust and continue to return profits into 2018 but with the implementation of IFRS 9, which require banks to recognise impairment sooner and estimate lifetime expected losses against a wider spectrum of assets, which is expected take effect from 2018, we expect a prompt increase in the banks impairment charge, which will reduce profitability going forward but make banks stronger and less exposed to risk of impairment shocks.

Also, despite the reduction in interest rates, which is expected to increase banks’ lending to the real sector of the economy, the implementation of IFRS 9 may hamper some of the banks as an aggressive rise in loan advances would give rise to increased provisioning, which may affect the bank’s capital buffers in the immediate. All in all, the banks are expected to have a decent outing during the year 2018 with less shocks expected in the sector.

Do you think there is need for rates cut following the decline in inflation?
Having maintained the Monetary Policy Rate (MPR) and Cash Reserve Requirement (CRR) at 14 per cent and 22.50 per cent respectively while also retaining the asymmetric corridor of +200 bps above and -500 bps around the MPR for over a year, we expect a rate cut at the first meeting of the Monetary Policy Committee of the CBN in 2018, and we are of the opinion that the committee will cut the benchmark interest rate by 0.5 per cent or 1.00 per cent thereby taking the Monetary Policy Rate (MPR) to 13.50 per cent or 13.00 per cent.

The projected cut in rate is imminent owing to CBN’s continuous slash in stop rates for treasury bills, which once stood at a high of about 18.815 per cent in May 2017 and closed the last auction date at 15.57 percent last November.
The continuous decline in inflation figures have also supported the banks target to reduce the interest burden on its debt obligation and also offer real return on its securities.

In a bid to reduce the country’s domestic debt obligation, CBN repaid all the maturing treasury bills that matured in December 2017 and have signalled that it would continue to drop its stop rate going forward into year 2018 even as the CBN targets inflation rate below 12 percent for 2018.

As CBN drops MPR rate, we expect the real sector of the economy to benefit as a few banks will be forced to lend to the real sector of the economy as government securities become less attractive given the low return being offered.
Businesses will also see their interest expense drop on the back of dropping interest rates and we anticipated the MPR to close the year at 12 per cent, 2 per cent down from 14 per cent benchmark rate as at December 2017.

What is your take on the stock market in 2017 and the prospects in the current year?
The Nigerian stock market had an impressive showing in 2017 having closed the year with return of 42.30 per cent making it the third best performing stock market behind Argentina, which returned 77 per cent and Turkey that returned 48 per cent, we have projected a 25 per cent return for the Nigeria Stock Market for 2018 though downside risk to achieving this target remain visible.

The market gains in 2017 were driven by impressive returns in the Banking sector, which returned 73.32 per cent, the consumer goods sector that returned 36.97 per cent and the industrial goods sector, which returned 23.84 per cent while other sectors of the market recorded gains except for the Alternative securities market (ASEM), which closed down by 8.60 per cent.

The trading aspect recorded significant recovery while the market witnessed increased issues compared to 2016 where there were no issues.
The year 2018 is expected to witness a similar trend observed in 2017 as economic indicators have improved and the world now projects increased investor confidence and GDP growth for Nigerian economy.

Going forward we expect to see more trading activities in the secondary market as listed companies will begin to trade at new highs never seen before even as their profitability soars on the back of a vibrant economy.
The primary market is also expected to be active in the year with expectation of new listings, mergers and acquisitions, Rights issue, listing by introduction etc. are all expected to drive overall market activity and deepen the market in the process.

What do you think will determine the success of the market this year?
The success of the Nigerian stock market will be hinged on many factors. Amongst them are the firming or stability of oil prices; constant monitoring and effective management of the foreign exchange market; improvement in corporate earnings for the period; significant focus on the non-oil sector to increase output; enhancing the country’s non-oil sector export proceeds to improve FX liquidity; a lower interest rate regime; effective implementation and communication of the government economic policies.

Others include government focus on the real sectors of the economy to stimulate the economy; improve market participation by local investors and Domestic institutional investors; continuous robust regulatory oversight of the listed companies by all the market regulators; passage of Petroleum Industry Bill, unbundling of Nigerian National Petroleum Corporation (NNPC) and listing of the resultant companies; listing of already privatised companies such as MTN, Gencos and Discos and effective use of monetary policies.

Having seen the nine months earnings result for most of the listed companies, investor will begin to take position in anticipation of the companies audited result, dividend declaration and Q1 2018 result, which we expect to boost stock prices in the immediate and also trigger further activities especially for companies, which report impressive performance for their Q1 2018 numbers.

Generally, despite the downside risk to the outlook of the equities market, we are optimistic about the performance of the equities market as we believe that most of the fundamentals are in favour of a further surge in the equities market.

In conclusion, despite the rally observed in the equity space in 2017, there remains a pool of untapped potential in the stock market as most of the listed companies still trade at prices below their book value while a few stocks still trade at prices below our recommended target price.

We believe the current prices still gives room for ample upside and significant return to investors despite the fact that the dividend yield of the company would have slightly inched lower on the back of rising prices but still remain attractive especially with the potential benefit of capital appreciation in the short to medium term. We however, advise that investment in the stock market be made mainly on fundamental analysis and not on the back of a band wagon effect, which could fizzle out at any moment and keep the investor trapped in a wrong stock.

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Nigerian now AACSB secretary-treasurer

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The world’s largest business education network, Association to Advance Collegiate Schools of Business (AACSB) International, has appointed the Dean of Lagos Business School (LBS), Dr. Enase Okonedo, as its secretary-treasurer.
She was elected to the board in 2015, and her new position became effective February 6th, 2018.

Okonedo, according to a statement from AACSB, is an accomplished professional with more than 30 years experience in the financial services and business education sector.
She has held several leadership positions at LBS, including that of the EMBA director, academic director, and deputy dean of academics.

In recognition of her leadership and contributions to the Nigerian education sector, she was awarded a fellow of the Society of Corporate Governance Nigeria (SCGN).
Also, she is a fellow of the Institute of Chartered Accountants of Nigeria (FCA) and a fellow of the International Academy of Management (IAM).

Besides, AACSB has recognised Mr. Paul Orajiaka an alumnus of the Lagos Business School over the positive impact the business school graduates were making in communities around the globe.
Orajiaka – the Advanced Management Programme 20 and the Executive MBA 14, was recognised at AACSB’s 2018 Deans Conference in Las Vegas, Nevada, USA.

He was among a group of 29 business pioneers from 13 industry sectors, whose careers are addressing today’s most pressing social, economic, environmental and educational challenges.
Orajiaka was nominated by the Lagos Business School and was honoured for his passion for social entrepreneurship.

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Fortis MFB: Regulatory hammer cuts earnings

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The technical suspension on Fortis’ shares for inability to submit financial statement as at when due impacted negatively on the earnings of the lender. Chris Ugwu writes

 

Microfinance Policy Regulatory and Supervisory Framework (MPRSF) were launched in 2005 and the objectives were to address the prolonged non-performance of many existing community banks.
This has been attributed to incompetent management, weak internal controls and high cost of transactions. Other objectives to be addressed by MPRSF are poor corporate governance, lack of well-defined operations, restrictive regulatory/supervisory requirements, and weak capital base of existing institutions.

Indeed, a huge gap exists in the provision of financial services to a large number of active but poor and low income groups, especially in the rural areas as a result of rigidity in operations of formal financial institutions in Nigeria.
However, despite the efforts, the problem of funding has remained a major militating factor against the effectiveness of micro finance banks in Nigeria.

This is because the Nigerian economy has continued to face major headwinds, from substantial decline in international crude oil prices to significant constraints to business activities in the north eastern part of the country owing to the activities of insurgents.

The fall in crude prices had heightened pressure on the Nigeria’s foreign reserves and the domestic currency, leading to the volatility in exchange rate and a dip in foreign reserves.
These microeconomic pressures and unrelenting regulatory adjustments have to a large extent constrained the margins of financial institutions in the country.

Fortis Microfinance Bank Plc, which had sustained considerable growth in bottom line, has also been affected by not only harsh operating milieu but investors’ negative perception following the suspension NSE placed on its shares for default in filing 2016 financial results as and when due.

The MFB, which began to show positive outlook earnings during the second quarter of 2016, dropped sharply in the third quarter of third quarter of 2017.
The share price, which closed at N2.58 per share in March 31, 2017 has remained at the same price even as at Friday due to the technical suspension placed on the shares of the company.
Financials
Fortis Microfinance Plc began the first quarter ended March 31 2016 with 55.31 per cent drop in profit after tax to N71.910 million from N160.933 million recorded a year earlier.
Its pre-tax profit equally dropped by 55.31per cent from N102.728 million the previous year to N229.904 million during the period under review.
Fortis’s interest income grew by 17.89 per cent from N566.429 million in 2015 to N667.774 million during the financial year 2016.

However, the lender’s second quarter ended June 30, 2016 profit after tax grew by 14.42 per cent to N267.996 million from N234.225 million recorded a year earlier.
The institution’s pre-tax profit equally grew by 14.42 per cent from N334.608 million the previous year to N382.851 million during the period under review.
Fortis’s interest income grew by 37.73 per cent from N1.304 billion in 2015 to N1.796 billion during the financial year 2016.

Also, the lender’s third quarter ended September 30, 2016 profit after tax grew by 15.27 per cent to N421.729 million from N365.845 million recorded a year earlier.
In a filing from the Nigerian Stock Exchange (NSE), the microfinance institution’s pre-tax profit equally grew by 15.27 per cent from N522.636 million the previous year to N602.471 million during the period under review.
Its interest income rose by 44.38 per cent from N1.836 billion in 2015 to N2.651 billion during the financial year 2016.

Fortis’ full year ended December 31, 2016 profit after tax inched up marginally by 0.44 per cent to N586.255 million from N583.703 million recorded a year earlier.
The microfinance institution’s pre-tax profit however, dropped by 5.65 per cent from N882.521 million the previous year to N832.605 million during the period under review.
Its interest income increased by 19.26 per cent from N3.649 billion in 2015 to N4.352 billion during the financial year 2016.

Fortis Microfinance sustained positive bottom line in the half year ended June 30, 2017 with profit after tax growing by 152.82 per cent to N677.549 million from N267.996 million recorded a year earlier.
A report obtained from the NSE, showed that the microfinance institution’s pre-tax profit equally rose by 152.82 per cent from N382.851 million the previous year to N967.927 million during the period under review.
Fortis’s interest income rose by 40.53 per cent from N1.796 billion in 2016 to N2.324 billion during the financial year 2017.

However, the MFB’s third quarter ended September 30, 2017 profit after tax dropped by 82.52 per cent to N73.713 million from N421.729 million recorded a year earlier as challenges of operational environment tool toll on the company.
Its pre-tax profit equally fell by 82.52 per cent from N602.471 million the previous year to N105.305 million during the period under review.
Fortis’s interest income grew marginally by 3.36 per cent from N2.651 billion in 2016 to N2.740 billion during the financial year 2017.

Default in filing results
Consequent upon the inability of Fortis to submit its year end 31 December 2016 audited financial statements to the NSE when due, as required by the applicable provisions, the shares of the Bank were suspended from being traded on the floor of The Exchange.

According to the management, the non-rendition of statements to the Exchange within the material period was chiefly attributable to the fact that, as a banking institution, the statements of Fortis had to be submitted to the apex bank prior to being released for any purpose.

“The technical suspension of Fortis’ shares from the trading floor of the Exchange set off a chain reaction that culminated in several unintended outcomes, the most significant being the panic withdrawals of deposits it triggered. This was because the announcement was largely misconceived, misinterpreted and misunderstood as a revocation of the Bank’s operating license.
“Although the Exchange lifted the suspension on 15th September 2017, after the Bank submitted the financial statements and met other conditions for the lifting as required by the Exchange, it was impossible to change the mindset of majority of depositors within such a very short time, “the management noted.

It noted that the Bank is addressing these challenges, adding that in the third quarter of 2017, just as Fortis was on the cusp of migrating to a more versatile and robust Core Banking Application, several accounting anomalies were unearthed that had to be immediately brought to the attention of the Bank’s primary Regulator, the Central Bank of Nigeria.

“Due to the observed accounting irregularities, previous financials filed with regulatory authorities and released to the public may have been impacted and may have to be restated where necessary. With the approval and guidance of the CBN, Fortis is currently engaged in a far-reaching house cleaning exercise, which at the end will culminate in the emergence of a leaner, healthier bank set apart by a renewed emphasis on professionalism and adherence to international best ethical standards,” the Bank said.

Outlook
In furtherance of the process of enshrining good corporate governance, the lender said it recently identified three qualified individuals with considerable experience to join the Board as independent directors who have no previous existing relationship with Fortis in any way, shape or form.

These individuals according to the bank, would be presented to the shareholders for their approval at the next Annual General Meeting (AGM) of the Bank, which is expected to hold during the first quarter of 2018.
“If approved, the addition of these individuals to the Board will enhance the Board’s capacity to perform its oversight functions and enhance the workings of various critical board committees.

Furthermore, negotiations are on-going with the bank’s group of foreign lenders to grant it the much needed respite through the restructuring of existing facilities,” it said.
The bank added that discussions are also at an advanced stage to engage a reputable firm of turnaround experts working in concert with a revitalized management team to quickly restore the FMFB on the path of sustainability and profitability, through the adoption of a revised business model and rejigging of the existing Five-Year Strategic Plan.

Last line
For micro finance sector to experience positive times, the industry should embrace changes in business environment, which presents uncommon opportunities to deepen penetration of the market through creativity and ingenuity.

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