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‘We have over 1bn litres of petrol’– NNPC debunks rumour of impending fuel scarcity

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The Nigerian National Petroleum Corporation (NNPC) has urged Nigerians to disregard rumours of an impending scarcity of petrol in the country.

In a statement issued by Ndu Ughamadu, NNPC spokesman on Thursday, the corporation said such rumours were “tales fabricated by mischief makers with intent to create undue panic in the prevailing sanity in the fuel supply and distribution matrix across the country”.

“The Nigerian National Petroleum Corporation (NNPC) has once again appealed to Nigerians to disregard trending social media report of an impending fuel scarcity due to purported refusal by some oil  marketers to lift products from depots,” the statement read.

The state oil firm reassured Nigerians that it already has an ample stock of over one billion litres of petrol, with over two billion litres secured for April through imports of 48 vessels  with each having a capacity of 50 million litres of petrol.

It said there was “no need for panic buying or hoarding of petroleum products in anticipation of a phantom scarcity.”

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The Sad Inside Story Of Heritage Bank

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Three months ago Proshare had cause to commit resources to investigate and produce an hitherto unpublished Confidential Report on Heritage Banking Company Limited, in direct response to the promptings of the advisory board members who wanted to know the true state of the bank which had another financial institution handling clearing operations for it at some time.

By this time, and curiously; it wasn’t such a big news that some of the bank depositors had experienced recurring challenges with withdrawals and staff exits did little to help matters. Yet, the restraint was important in order to ensure and support financial system stability as well as give the institution an opportunity to execute its resolution strategies without hindrance. After all, the institutional frameworks were in place to protect depositors and the system in general.

The task involved a lot of stakeholder engagements including sources we understood to be in a position to recognize, appreciate and make informed decisions. The revelations offered little comfort from history to, interventions up to the current state. We limited ourselves however to facts, data and evidence and submitted the report.

Further to the completion of this initial review, and in the interest of giving the financial system an opportunity to resolve the bank’s challenges through normal regulatory intervention and management effort at recapitalizing the institution or determination of the banks going concern status through a merger and acquisition (M&A) arrangement; the report remained private.

The burden of a moral hazard however appeared a bigger burden than tolerable or envisaged, especially given the evident ‘sailors survival’ approach that appears to have kicked in as seen through senior management exit, non-improving conditions, non-progressing talks around mergers and acquisitions; and recapitalization plans.

It has become compelling to highlight concerns about the bank formally; with the hope that ‘some intervention’ can happen to alter the trajectory of an inevitability. and remove the spectre of a bank waiting to die that overshadows the institution, unfortunately.

Proshare’sinvestigation into the bank revealed a few major concerns related to corporate governance and operational stability/sustainability. The primary issues included, but were not limited to the following:

  • The acquisition of Enterprise Bank which is turning out to be a major strategic error;
  • HBL’s non-performing loans (NPLs) portfolio, which are amongst the most challenged in the industry. Impairment charges in H1 2018 was estimated at N37.5bn but by year end, we extrapolated that the figure should settle around N634.5m;
  • The bank posted an operating loss before tax of N38.5bn in H1 2018 and a loss of N4.4bn in the unaudited figures for the month of December 2018;
  • The bank’s leverage has been a major sore point for management. The banks debt to equity ratio was -0.17. The negative value reflected negative shareholders fund which could be impaired by as much as $1bn;
  • Equity capital has been virtually wiped out by accumulated losses, a legacy issue;
  • The bank’s regular recourse to the CBN’s short term borrowing window highlights persistent liquidity resolution issues;
  • Corporate governance has been a challenge as a number of the bank’s directors have allegedly been involved in a series of poor performing insider loan transactions, and little known about such resolutions (if any);
  • The bank’s 2018 unaudited financial figures shows a dire situation in several operational metrics; and
  • The bank has not been engaged in direct cheque clearing for a while, HBL’s instruments have been cleared through a third party first tier bank which got a full CBN guarantee against clearing loses.

IEI’s Pound of Flesh 

It is instructive to recall how this sorry pass all began. Records indicated that Heritage Bank was in a difficult place from the start. It’s managing director and chief promoter, Ifie Sekibo, was the former Executive Vice Chairman (EVC) of International Energy Insurance (IEI) Plc from where a sizable amount of the acquisition money for the old SGBN was raised. Sekibo has been in a stretch of back and forth with the Board of his former company on this subject, as the directors of the company insist that Heritage Bank should be considered as part of the assets of the Insurance group; going as far as alleging that Sekibo had invested the insurers money in the bank without the approval of then Board members; or indicating/stating IEI’s consideration in the bank acquisition, if any.

The matter of using IEI resources to acquire the former Societe Generale Bank of Nigeria (SGBN) which was renamed Heritage Banking Company Limited has been the subject of a longstanding Economic and Financial Crime Commission (EFCC) investigation and continues to hound the bank’s CEO till date. Our background work on the matter then, enabled us to sight documentations that lends credence if not validity to the role played by IEI as reflected in presentations made to its board.

Proshare Nigeria Pvt. Ltd.

Source: What Happened To The N8bn Raised by IEI Plc in 2007? – Shareholders – Proshare, May 11, 2015

Mr. Sekibo has over the past few years tried to work out an amicable settlement with the IEI Group and directors, but matters are still fluid with necessary concessions being made on both parts. That said, the CEO’s travails still continue as he has had to deal with a few other issues concerning related-party transactions that have crystallized and left the bank’s books in a difficult position.

Weak Governance and Control 

Heritage Bank’s problems have most certainly not been about Sekibo, alone. Far from it, the bank’s Board of directors (including former directors) has created a permissive culture that led to this.

Heritage Bank’s erstwhile chairman was also known to have used the banks tills to acquire two electricity distribution licenses’ the underlying cash flow difficulties of the businesses were subsequently and promptly transmitted to the bank, resulting in large repayment defaults. Indeed the loans have become ‘hardcore’ non-performing assets sitting on the bank’s books and creating both liquidity and profitability difficulties.

Managers of the bank, particularly branch managers, were in the past profligate in granting authorized and unauthorized loans to associates. Temporary overdrafts (TODs) routinely skipped repayment dates while structured loans also habitually missed the terms of the loan indenture, resulting into phantom profits and worsening liquidity.

Huge public sector deposits were beauties turned into beasts. The introduction of the Treasury Single Account (TSA) policy by the federal government in 2015 subsequently left the bank’s Asset and Liability Management (ALM) position in tatters.

The TSA policy did four things to undermine the bank’s fiscal stability:

  • Sharply reduced the bank’s deposits;
  • Significantly raised the banks cost of Funds (CoF);
  • Reduced the bank’s ability to give short term loans; and
  • Weakened the bank’s already fragile profitability.

Since the bank was already nurtured on a culture of entitlement, finding strategic options to wriggle from, under the weight of government policy and patronage became impossible.

Heritage Bank’s narrow retail base and its poor quality risk assets put inevitable pressure on profitability and liquidity. To compound matters, the bank’s internal control and compliance functions appears to have operated under a cloud of breaches than in the protection of standard corporate governance requirements, as directors willy-nilly violated single obligor limits. The poor internal control and audit process and administration at the bank thus complicated an already combustible bad loan and poor liquidity situation.

Coup de Foudre (Unintended Consequence) 

As a way out of its myriad of challenges, the bank fell in love with another entity, committing a tragic error. In a bold but ill-digested move, Heritage Bank decided to acquire the Asset Management Company of Nigeria’s (AMCON’s) legacy deposit money institution, Enterprise Bank, this was the decision that let all the evil spirits out of Pandora’s box. The acquisition of Enterprise Bank was the classic example of a Cobra Effect or a situation where a cure becomes worse than the original disease.

The decision to acquire Enterprise Bank for N56bn in 2014 resulted in unintended consequence. At the time, the bank’s Board rationale in acquiring Enterprise Bank from AMCON was to rapidly expand the retail end of HBL’s operations and reduce its cost to income ratio based on representations that informed their decision. That gambit has proven to be a disaster and a cautionary tale on acquiring distressed banks unfortunately.

The Enterprise Bank wedlock, as consummated, turned into a fiasco as it added a further two hundred (200) branches to the banks operations and cut interest expense while improving net interest income (see chart 1 below). This led to the following outcomes:

  • A sudden and significant rise in the bank’s bad debt to asset ratio;
  • A leap in the bank’s debt provisioning or loan impairment requirements;
  • A major rise in operational costs;
  • A rise in the banks cost to income ratio (99% in FY 2018, as against the 53% of a bank like StanbicIBTC). (See chart 2 below);
  • Stretching human capacity by lifting managers to their highest levels of administrative and technical (in)competence (The Peter Principle); and
  • Low Interest Income (as a result of slowing lending activities, (see chart 3) and high interest expense (as a result of a relatively low retail customer base, (see chart 4). 

Chart 1 Net Interest Income FY2018, Heritage Bank and StanbicIBTC Bank 

Proshare Nigeria Pvt. Ltd.

Source: Reported Financials Submitted / Estimated

Chart 2 Operating Expenses/Income FY2018,Heritage Bank and StanbicIBTC Bank

Proshare Nigeria Pvt. Ltd.

Source: Reported Financials Submitted / Estimated 

Chart 3   Interest Income FY2018, Heritage Bank and StanbicIBTC Bank

Proshare Nigeria Pvt. Ltd.

Source: Reported Financials Submitted / Estimated

Biting into the Heritage Saga – What The Report  Says

To understand the nexus between weak corporate governance, hubris, regulatory indulgence and Heritage Bank, the reader can send an email to research@proshareng.com for a copy of the report.

The report is an attempt at a  holistic look at the banks realities and lays bare the challenges that occur when individuals and institutions fail to live up to the exacting standards that are required to turn fragile ideas into enduring legacies.

The report was carried out as an intervention guidance to prompt action from the various parties and interested entities; all in the overall interest of the financial system.

To protect the financial system from contagion, the Central Bank of Nigeria (CBN) may need to move into the affairs of Heritage Bank and any of three actions are now plausible:

  • Wind up the institution with shareholders losing their money (as things stand today shareholder’s funds have been completely eroded) while depositors resort to the National Deposit Insurance Corporation (NDIC) for part recovery of deposited funds;
  • Find fresh investors interested in the institution and intermediate a best effort basis sale of exiting shareholder interest and recapitalization of the institution as a going concern; and
  • Liquidation of the institution and the running of the bank under a new franchise as a legacy institution managed by AMCON and available for purchase by third party investors.

The preferred solution would appear to be either the second or third options.

The second option would be of particular preference as it would not involve heavy ‘menu cost’ by way of rebranding but would involve a new ownership – Board of Directors and management staff. The fresh capital inflow would eliminate the need for initial treasury support from public coffers and would likely result in fresh/foreign capital inflows which would be beneficial for the local currency while also protecting domestic employment. This approach would appear plausible given that the CBN recently gave out new licenses to start up banks; premised on their understanding that there exist room for new entrants with fresh ideas and approach.

The CBN would however have to work fast if Heritage Bank is not to be a blight on the Governors no-failure record.

From indicators received, there is a small window to achieve a technical resolution of the Heritage Bank situation, lest it could find itself taking remedial action(s) at a much higher economic cost later than it would now.

Heritage banks weak liquidity, impaired shareholder funds and high loan impairment, according to analysts, needs action not tolerance. The time to act is now!  

Source: Proshare NG

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Titan Trust Bank set for grand entry into Nigeria

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Barring any last-minute changes, one of the five new banks licensed by the Central Bank of Nigeria (CBN), Titan Trust Bank Limited is set for entry into the Nigerian banking industry in grand style, in a matter of weeks, The Witness can authoritatively reveal.

This newspaper had reported that the CBN recently approved licenses for five new banks to operate in the country.

While others are still recruiting and putting things in place, inside sources say Titan Trust, a national financial institution, has completed its processes and is set for take-off soon.

Led by seasoned banker and former deputy governor of the CBN, Mr. Tunde Lemo as chairman, the new commercial bank, sources informed The Witness is starting operation with a solid post capitalization financial base in real cash.

Some of those already on board the new bank are experienced financial gurus, giving the signal that the bank is ready the compete with the long-standing and well-rooted Nigerian banks.

According to the lender, the bank was formed to take advantage of the identified gaps in the banking sector and address the unmet needs of the retail mass market, SMEs and corporates.

The new bank headquartered at Plot 1680, Sanusi Fafunwa Street, Victoria Island, Lagos, Nigeria has the following facilities: Commercial Banking, SME Banking, Digital Banking amongst others. On its commercial banking services, the lender said on its website: “As a national commercial bank, we are committed to supporting businesses, giving them the power to build a better future. Each day, companies are working together to create sustainable economic value.

“We are committed to that vision by ensuring we provide business capital and resources, primed to support these visions, as we continue to tell Africa’s story.”

Titan Trust Bank believes there is nothing like a small business. “All businesses are exactly that; businesses! Our team is made of professionals with an entrepreneurial mindset, working to help you and your business take advantage of the many benefits of banking with Titan, and give your competition a run for their money,” it said.

Titan Trust further posited that it will leverage on digital platforms to empower the emerging pan-African economy, whilst showcasing the industry pioneering solutions, expertise and professionalism.

Established on the 12th of December 2018, the bank obtained its national banking license on the 26th of April 2019, to operate as a commercial bank with national authorization.

OTHERS IN THE TITAN TEAM

Mr. Andrew Ojei

Mr. Andy Ojei is a Fellow of The Institute of Chartered Accountants of Nigeria as well as a Fellow and Council Member of The Institute of Credit Administration of Nigeria.

He was the pioneer managing director of Zenith Bank, Ghana. He left Zenith Bank Plc in June 2013 as an executive director after 21 years of service. He is a seasoned businessman with interests in real estate and information technology.

Ojei, an alumnus of the University of Lagos, Enugu State University of Science and Technology, INSEAD (France), Stanford (Singapore) and Wharton (Philadelphia) currently serves as a member of the Governing Council of Ritman University, Ikot Ekpene, Akwa Ibom State.

Alhaji Abubakar Mohammed

Alhaji Abubakar Mohammed is a seasoned entrepreneur with over 30 years’ experience managing and leading businesses across the country.

He is the managing director of Syndicated Investment Limited, a construction firm. He has held this post for over 33 years.

He has also been the chairman/CEO of Impex Limited, a security, contracting and trading company since 1993.

Alhaji Aminu Bashari

Alhaji Bashari Aminu (Iyan Zazzau), is the chairman of the Board of Directors of Vital Products Limited.

He is a Fellow of the Institute of Financial Accountants (UK) and a Fellow of the Association of National Accountants of Nigeria. He is a senior title holder in the Emirate of Zazzau and was a Senior District Head of Sabon-Gari, Zaria in Kaduna State from 1979 to 2018.

He is currently on the board of several companies.

Mudassir Amray – MD/CEO

Mudassir Amray is a banker with over 25 years of global exposure across six geographies (US, Nigeria, Malaysia, Hong Kong, Singapore, and Pakistan).

He has held senior positions in global banks such as: Citi New York – Managing Director & Head of Global Capital Management (LATAM), Citi Nigeria – Managing Director & Head of Corporate & Investment Banking, Nigeria and Ghana, Al Rajhi Malaysia – Country Business Head, Citi HK – Head of Capital Management, Asia Pacific, Citi Singapore – Head of Islamic Banking, Asia Pacific, Citi Pakistan, Country Business Head.

Adaeze Udensi – Executive Director

Adaeze has over 23 years’ banking experience, and was until recently, an Executive Director in Heritage Bank.

In her four years as executive director, she supervised the South businesses; oversaw Retail, Private Wealth, Collections, E-Business, Customer Experience and IT functions; and served as Executive Compliance Officer.

Adaeze also acted as managing director of Heritage Bank in 2017. Prior to this, she spent 16 years in Zenith Bank growing its Oil & Gas, Public Sector, Commercial and Retail businesses into the 2nd largest portfolio in the Bank, leaving as a general manager.

Adaeze has a first degree in banking, and MBA’s from Rivers State University of Science & Technology, and the University of Bangor, Wales.

She has also attended several Executive Management Programmes in Wharton Business School, Kellogg School of Management, Harvard Business School, and INSEAD.

Stella Nwihim – Head of HR

Stella is a seasoned professional with over 21 years’ experience spanning Human Resources, Sales and Banking Operations.

She has held key HR positions in Zenith Bank Plc and UBA Plc including Head Workforce Planning, Head Shared Services and Head Business Partnering, where she made significant contributions in organizational development, performance and change management and business strategy.

She holds a B.Sc. and M.Sc. (Biology) and an MBA (Management) and is a member of the Chartered Institute of Personnel and Development (CIPD).

Mark Oguh – CFO

Mark has 22 years’ experience in the banking industry covering Operations, Audit and Financial Control.

He is also a Fellow of the Institute of Chartered Accountants of Nigeria and Chartered Institute of Taxation of Nigeria.

He holds a Bachelor’s degree in accountancy and business administration and an MBA in banking and finance. He was the financial controller at Diamond Bank from 2015 to March 31, 2019.

Ademola Ajayi – Chief Compliance Officer

Ademola Ajayi is the chief compliance officer of Titan Trust Bank Limited. He holds Bachelor’s Degree in Accounting (First Class Honours) from Babcock University, Ilishan Ogun State. He also holds Higher National Diploma in accounting with Upper credits class from the Polytechnic, Ibadan. He is a fellow (FCA) of the Institute of Chartered Accountant of Nigeria (ICAN). He is also an Associate of Compliance Institute of Nigeria (CIN). He is a Security and Exchange Commission (SEC) registered Compliance Officer and a registered professional of Financial Reporting Council of Nigeria (FRCN). Internationally, he is a Certified Compliance Officer (CCO) and Certified Fraud and Crime; Investigation and Prevention by GAFM USA. He is also a fellow of GAFM USA.

He has been in the Nigerian Banking Sector since 1996, well over 2 decades, with experience cutting across financial control, credit review and monitoring, business development, banking operations, internal controls, internal audit, inspection and compliance functions. His career in banking started in NAL Merchant Bank, where he did the mandatory one year national youth service. Immediately after his service year, he was recruited by Zenith Bank, where he performed creditably well in banking operations generally, controls and risk management related functions, and later with specific focus on compliance risk management role. He played a key role in setting up compliance department in Zenith Bank and took same to an enviable height. Ademola AJAYI is a team player, and will positively impact any team he finds himself. He has attended compliance trainings, locally and internationally. He is also a competent trainer on compliance matters.

George Aiyudu – Head of IT

George is a certified COBIT implementer with over 21 years banking experience covering Banking Operations, International Operations and Information Technology.

He holds a Bachelor’s degree in Chemical Engineering and also holds a Masters Degree in Business Information Systems. He was the Group Head, IT Change and Transformation at Diamond Bank.

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Ibom Air begins commercial operations on Friday

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Ibom Air, the first commercial airline to be owned and operated by a state government in Nigeria and Africa, will begin full commercial operations on June 7, an official said.

Ekerete Udoh, the Chief Press Secretary to Governor Udom Emmanuel, made this known in a statement on Thursday.

Mr Udoh said that the airline, having fulfilled all the regulatory conditions and requirements, was certified fit to commence commercial operations, leading to the maiden flight billed for tomorrow, June 7th.

“It will maintain regular daily flights to both Lagos (MMA2) and Abuja respectively.

“The aircrafts in its fleet (Bombardier CRJ 900) have the distinction of being relatively new, all three, under 10 years old,” Mr Udoh said.

He said the commencement of the commercial operations by Ibom Air had been celebrated by Akwa Ibomites and other Nigerians as a testament to the visionary leadership of Mr Emmanuel.

“The governor who seems determined to break conventional wisdom concerning things long thought to be impossible to achieve,” he said.

He noted that the development was Gov. Emmanuel’s avowed determination to open the three gateways to industrialisation-land, sea and air appears to be on course.

The News Agency of Nigeria (NAN) recalled that Ibom Airline which represents one of the signature projects Mr Emmanuel’s First Term.

The Ibom Air was launched on February 20 with three aircrafts by the Senate President, Bukola Saraki.

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