Banks in Dilemma as Customers, Investors Shun Deposits for Treasury Bills  

• CBN, NCC to tighten conditions for sim swap
• Extends BVN enrolment deadline for MFBs, others’ customers

By Obinna Chima

Nigerian banks are currently finding it extremely difficult to mobilise deposits from institutional investors such as Pension Fund Administrators (PFAs) and insurance companies as well as individuals due to the attractive treasury bills yields.
The increasing awareness of the opportunities in the treasury bills market is seeing a lot of banks lose deposits to fixed income investments.

This is because most investors and bank customers now benchmark interest rates on term deposit against treasury bill rates.
THISDAY findings showed that those affected most are the Tier 2 banks as they are finding it difficult to meet the demand of the fund holders.
But the Tier 1 banks are not under such pressure, THISDAY learnt.
The cash squeeze in the market clearly manifested in the interbank lending rate which increased to 23 per cent on Friday from five per cent the preceding Friday.

The Nigerian Treasury Bill currently offers a unique investment opportunity to investors. It offers security and guaranteed premium returns to its investors.
Last week, the 364-day instrument offered by the Central Bank of Nigeria (CBN) recorded excess subscription to the tune of N91.1 billion, whilst the CBN allotted N136.5 billion at a stop rate of 18.5 per cent relative to the offered amount of N120 billion. The 91-day (offer amount: N29.1 billion; subscription: N26.1 billion) and 182-day (offer amount: N80 billion; subscription: N69.75 billion) instruments were however undersubscribed, whilst the CBN allotted N23.2 billion and N69.57 billion at stop rates of 13.4 per cent and 17.4 per cent respectively.

An analyst at Ecobank, Mr. Kunle Ezun, who confirmed the situation in the money market, said the banks are feeling the brunt now.
“A lot of the PFAs, insurance companies and individuals are not willing to do term deposit again. They prefer doing treasury bills.
“If they do term deposit, they get around seven per cent interest. But they can get as high as 18 per cent from treasury bills. A lot of the banks today are losing deposits because of this.
“What the PFAs are saying is that if you cannot match treasury bills, bring back my money. Individuals are also saying: if you can’t give what treasury bills will give me, I am not going to save money with you.
“If banks don’t have deposits, they can’t give loans. The few banks that are ready to match treasury bills rates are doing that at a cost,” Ezun said.

The Chief Finance Officer, Wema Bank Plc, Mr. Tunde Mabanwoku, also confirmed the challenge currently faced by the Tier 2 banks.
Mabanwoku explained: “What we see now is that customers are increasingly benchmarking treasury bills rates. So, when customers come in that they want to do fixed deposits and you tell them its 12 per cent, they would be comparing what you tell them with treasury bill rates.
“So, customers are becoming a lot more aware of what is happening out there and they are saying if they can put their money in treasury bills at 17 per cent, why should they put their money in a bank at 12 per cent.
“So, banks have had to increase their cost of deposits just to match or get close to the sovereign rate.”
Also, the Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, disclosed that owing to the opportunities in the treasury bills segment, foreign exchange speculators who had converted their naira to the dollar are now re-converting the greenback, back to naira in order to invest in fixed income securities.
He said those that doubted the ability of the central bank to sustain its intervention are now convinced that the banking sector regulator has enough ammunition to sustain its foray in the market.
He said: “People have been observing the development in the forex market. We have observed for over four months, the CBN has continued to emphasise that they would continue to intervene.
“In addition to that, despite the frequent intervention by the CBN, the reserves have also not been depleting. So, that has boosted confidence.
“Also, if you look at the volume of transactions in the investors and exporters’ window, that has also increased and we have seen banks now re-introduce their naira cards for dollar transactions.
“So, those people that were trying to take arbitrage opportunities, especially those that entered when the dollar was as low as N400-N500, are trying to cut their losses by investing in risk-free investments like treasury bills. Luckily for them, the interest rate is also very high.”
Nigeria’s external reserves stood at $30.927 billion as at August 3.

CBN Extends BVN Enrolment Deadline

Meanwhile, the CBN has extended the deadline for the registration of Bank Verification Number (BVN) for customers of microfinance banks (MFBs), mortgage banks and other financial institutions (OFIs) under its regulation to December 31, 2017.
The deadline had expired 31st July 2017.
The CBN stated this in a circular posted on its website at the weekend that was signed by its Director, OFIs, Mrs. Tokunbo Martins.
It said part of its reasons for the extension was to support better compliance and avoid further financial exclusion.
It added: “As you are aware, the deadline expired 31st July, 2017, and consequently several OFIs are in breach of this regulatory directive.

“However, due to conscientious efforts noted, the CBN is disposed to acceding to the appeals received from the Financial Inclusion Secretariat, the National Association of Microfinance Banks, and members of Mortgage Bankers Association of Nigeria, soliciting for a shift in the deadline to support better compliance and avoid further financial exclusion.
“The various challenges encountered in the early stage of the deployment of the joint CBN/NIBSS support to members of the NAMB have also informed management decision. In this regard, management has approved an extension of the timeline to December 31, 2017, to enable all OFIs to continue with the BVN enrolment and report progress.”
Among other things, the central bank urged OFIs to ensure that all customers are enrolled on the BVN platform utilising appropriate KYC requirements before the expiration of the fresh deadline.

Meanwhile, the CBN Director, Banking and Payments System Department, Mr. ‘Dipo Fatokun, at the weekend disclosed that the central bank and the Nigerian Communications Commission (NCC) would soon make regulations to tighten the process of sim swap for telecom subscribers.
Fatokun disclosed this in a presentation titled: “Electronic Payments Industry’s Performance and Regulatory Issues,” which he made at a bi-monthly forum organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
The CBN director said the initiative would help in checkmating the activities of fraudsters, adding that some of the incidences of fraud in the industry emanate from sim swap.
He said: “We have heard of instances where people would say for three days my phone did not work. And because many of us carry more than one phone, if one is not working, at least one will work.
“So, what they (fraudsters) do is that they swap your phone. That is, they just walk up to a service provider and claim to be the owner of the line. Most often, they have studied that number and they have collaborators, probably in the bank.
“And because the process for doing a change of sim is so loose, the telecom company would change the sim for the person and so he assumes the phone number.
“What does he do? He puts the sim in another phone and starts using the USSD to make transfers out of the account into another account. So, we are working with the NCC to tighten the process of sim swap. It may include biometrics and a unique number may be required.”

According to Fatokun, over the last three years, the cases of electronic fraud in the country has reduced.
This, he attributed to the introduction of Bank Verification Number (BVN).
Fatokun added: “The game changer is the BVN. It is not only helping us to identify who owns what but going forward, just as it was announced by the Bankers’ Committee at the last meeting, the BVN would be used as an instrument to track fraudsters in the system.
“When electronic fraud happens, money is moved from one account to another account. That other account that money is moved to, the owner can be identified. And when such owners can be identified, they can be blacklisted or watch listed.
“It means that fraudsters can be identified and if possible taken out of the system. So, the BVN is going to be a game changer in the respect. We are working on the final framework and when it is concluded, it would be issued to the industry.”

Fatokun cited the 2016 World Payments Report to have revealed that global non-cash (electronic payment) transaction volumes grew at 8.9 per cent to reach 387.3 billion in 2014. The increase was mainly driven by accelerated growth in developing markets.
The report also showed that cards have been the fastest growing payment instruments since 2010, as cheque use has declined consistently and significantly. It stated that debit cards accounted for the highest share (45.7%) of global e-payment transactions and were also the fastest growing (12.8%) payments instrument in 2014.
Global non-cash volumes were estimated to have grown by 10.1 per cent to reach 426.3 billion in 2015, aided by high growth in emerging economies across the world, including Africa.