Connect with us

Business

Why Banks Don’t Give Long Term Loans – Bank MD

Published

on

The inability of commercial
banks to give long-term credit facilities is due to the non-availability of long-term-deposits by Nigerians, a financial expert, Mr Nnamdi Okonkwo has said. Okonkwo, also the Managing Director, Fidelity Bank Plc, made the remark at a conference organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
The theme of the conference was: “Nigeria beyond Oil, Financing Options for Non-Oil Exports’’.
He said that most depositors who had huge amounts to save, did it on short-term basis because of uncertainties of the economic policies.
Okonkwo wondered why banks were always condemned at every occasion for not lending long-term facilities to businessmen and farmers, whereas they traded mainly with short-term deposits.
The managing director insisted “that commercial banks do not have the kind of huge amount of money to lend out to those in businesses for long-term period’’.
The financial expert also listed lack of the right framework as being responsible for local banks not lending long-term to Small and Medium Scale Enterprises (SMEs). He said lack of infrastructure, such as power, among others had made the bank to generate private electricity for its operations. According to him, banks paid full interest on all deposits, while 25 per cent was taken as Cash Reserve Ratio (CRR), leaving banks with only 75 per cent of the amount to trade with. He said, “If as a bank, I know a secret place where I can get long-term funds to trade with, I will be the number one bank in Nigeria today because I can lend  long-term.
“Bring me a depositor that will place N100 million today with me at 10 per cent.
“I will then give a loan at 15 per cent and pay the depositor’s interest on N100  million but I have to trade with N75 million because the Cash Reserve Ratio is deducted from the N100 million.
“For me to get access to five per cent of the money, I have to lend to a cocoa farmer. You have to lend for industrial production,’’ Okonkwo said.
The managing director said that banks paid three per cent as premium to Nigerian Deposit Insurance Corporation (NDIC) from all deposits.
“Not only that, the bank will also pay three per cent NDIC premium on the same N100 million deposit.
“Remember, I run my own power. In fact if you put together the voltage we produce in 248 branches of Fidelity Bank, it can power the whole of Lagos State,’’ Okonkwo said.
He said that it was difficult to get a Nigerian who will deposit money in the bank for one year, yet, people kept blaming the banks for not lending money for long-term projects. Okonkwo said that a lot of banks collapsed in the past because of assets mismatch. That is people who matched long-term assets with short-term funds.
“When there is a run in the system, the owners of the short-term funds will come for their money and you have to pay them.
“If you pay them, the people you gave long-term loans cannot pay up. Then you begin to have distress in the system”, he said.
The financial expert, however, said that the Nigerian Export Import Bank (NEXIM Bank) and Fidelity Bank Plc were taking measures to enhance non-oil exports and create wealth for Nigerians.
The managing director said the lender was always at the forefront of financial services solutions and lending, adding that supporting SMEs should go beyond funding. “This is what informed the Fidelity SME Radio Forum, a programme designed and sponsored by Fidelity Bank to educate, inform, advise and inspire budding entrepreneurs, that is aired on Inspiration FM Lagos,” he said.
The Managing Director/ Chief Executive Officer, Heritage Bank Ltd., Mr Ifie Sekibo, said Nigeria had export potential in some agricultural commodities like cocoa, cashew, groundnut and fish. Others are: sesame seed, ginger, cassava, snails, tobacco, coffee, cotton lint, rubber, among others. He said Nigeria could export bitter leaf, plantain flour, melon, crayfish and maize.
Sekibo was represented by Mr Olugbenga Awe, Group Head, Agriculture Finance, Project and Development Finance Department of Heritage Bank. He said that the country could also export manufactured goods such as: cocoa cakes, butter, powder and liquor.The managing director said that others include: detergents, malt drinks, palm kernel cakes and oil, baby clothes and confectioneries.
In the category of handicraft, Sekibo said that Nigeria could export talking drums, calabash, wood carvings, raffia products, among others.
He said that the nation’s entertainment industry contents from the Nollywood artists could be exported to neighbouring countries.
Sekibo expressed regret that exporters from Nigeria were not competing enough, adding that some Nigerian exporters went to Cameroun to bring in products and  blend them for exports.

Continue Reading

Business

NSIB, AAAU Sign MoU On Air Safety Training

Published

on

As part of efforts to curb mishaps in the aviation industry, the Nigerian Safety Investigation Bureau (NSIB) has signed a Memorandum of Understanding (MoU) with the African Aviation and Aerospace University (AAAU) to deepen training on preventing and reducing accidents in Nigeria’s air transport.
Director, Public Affairs and Consumer Protection of NBIS, Mrs Bimbo Olawumi Oladeji, in a statement, said NSIB granted AAAU access to its facilities to facilitate an efficient exchange of resources and expertise.
According to the statement, the Director-General/Chief Executive Officer of NSIB, Captain Alex Badeh, who spoke at the ceremony held at the NSIB Training School, noted that the MoU sets the stage for facility sharing, capacity building, and collaboration between the Bureau and AAAU.
“I am confident that this MoU will enhance the effectiveness of our collaboration and commitment to promoting safer skies and operational excellence in the aviation industry in Nigeria and beyond”, Badeh said.
Registrar of AAAU, represented by the Director of Physical Planning and Works, Engineer Masud Aliyu Yerima, was also quoted in the statement, saying, “The journey of AAAU’s establishment and progress would have faced considerable challenges without NSIB’s generous support”.
He commended Badeh for his exemplary leadership and steadfast dedication in propelling NSIB to greater heights, and affirmed AAAU’s readiness to engage in mutually beneficial endeavours with NSIB.
“This partnership marks a significant milestone in fostering a culture of safety and excellence within Nigeria’s aviation sector, and both NSIB and AAAU are poised to leverage this synergy for the benefit of the industry and the nation at large.
“The African Aviation and Aerospace University, AAAU, is the first Pan-African university dedicated to aviation, aerospace, and environmental science.
“Addressing two critical needs within the continent’s industry, AAAU tackles the research and development gap in Africa’s aviation and aerospace sector while simultaneously cultivating a skilled workforce to propel it forward”, the statement added.

By: Corlins Walter

Continue Reading

Business

Naira Rebound, Air Peace’s Expansion Deepens International Route Competition 

Published

on

he commencement of flights operations on the London route by an indegenous Carrier, Air Peace Airline, and the recovery of the local currency have sparked fresh competition on international routes.
Air Peace, Nigeria’s outstanding indigenous airline, may face a prolonged market battle with many foreign airlines with decades of experience in the industry following its entrance on the Nigeria-London route.
Some of the industry’s experts say the airline required support from the government and a strategic approach to stay competitive.
Analysts have also stated that the strategic move has garnered high praise from stakeholders in the aviation sector, considering that Nigerians were paying exorbitant prices to travel from Nigeria to London, but that sustaining this momentum will require more than just offering low prices.
On March 31, 2024, the 11-year-old airline made a bold statement with its inaugural flight, using a Boeing 777 aircraft, offering a capacity of 274 seats and carrying 260 passengers from Lagos to London.
It sold its tickets for N1.2m, a price way lower than the rates offered by most foreign airline operators plying the same route.
Just two weeks after entering the market, Air Peace’s Chief Executive Officer, Allen Onyema, complained on Arise TV that foreign airlines were undercutting prices in an attempt to push Air Peace out of the market.
Onyema said, “We are aware that there are devilish conspiracies. All of a sudden, airlines are pricing below the cost. One airline is advertising $100  and the other $350. If you peel up your entire aircraft and carry people on the wings, it is not even enough to buy fuel.
“Why are they doing that? Their government is supporting them because Nigeria has been a cash cow for everybody. The idea is to take Air Peace out, and the moment they succeed in taking Air Peace out, Nigerians will pay 20 times over. It would happen, God forbid, if they were able to take Air Peace out”.
It was gathered that an economy ticket for a flight scheduled for April 29, 2024, from Lagos to London costs about N679,375 on Ethiopian Airlines, an operator with 75 years of experience.
Air Peace priced the same ticket at N1,090,750. The difference is that on Air Peace, it will be a 6-hour non-stop flight, while on Ethiopian Airlines, it will take 16 hours with one stopover.
Last Friday, Ethiopian Airlines reduced the price of its London ticket by 0.77 per cent to N1,628,660 from  N1,641,249 two weeks ago.
In the same period, Air France’s price dropped to N1,687,824, nearly halving from last month’s N2,482,138.
On March 4, 2024, Lufthansa offered the Lagos-London route for N1,966,165. Qatar Airways provided the same ticket for N2,016,824, and KLM priced it at N2,448,740.
This continuous decline in air ticket prices was also driven by the strengthening of the naira against the US dollar and the payments of airlines’ trapped funds by the Central Bank of Nigeria.
Minister of Aviation and Aerospace Development, Festus Keyamo, had confirmed that the Federal Government, through the CBN, had cleared all the trapped funds (foreign exchange backlogs) to the tune of about $160m.
Beyond the ongoing price war, the Air Peace Chairman had also lamented the challenges with ground handling and space allocation at the London Gatwick Airport, adding that no airline has faced such obstacles before.
He noted, “On the inaugural flight out of London, 24 hours before departure, the management of Gatwick Airport moved us to another checking area instead of the designated one.
“The area they provided had a malfunctioning carousel, forcing us to manually transport luggage 50 meters away, causing delays”.

Continue Reading

Business

PH Airport Users Lament Down Turn In Flight Operations 

Published

on

Users and business operators at the Port Harcourt International Airport, Omagwa, have decried the downward trend in flight operations at the airport.
Some of the users and operators told The Tide that flight operations at the airport, rather than go upward, have steadily been irregular, and diminishing steadily.
A regular air passenger of the airport, Simeon Echeonwu, in a chat with The Tide, said many airlines, both domestic and international operators, that usually operate at the Port Harcourt airport, have stopped operations, whereas others that are still operating are no longer very stable as before.
Echeonwu noted that airlines such as Aero Contractors, United Nigeria, and Green Africa airlines, now operate about one flight, twice a week, unlike before that they flew every day on Lagos and Abuja to Port Harcourt.
Also speaking, former Chairman of the FAAN Accredited Car Hires Association, Clifford Wahunoro, lamented that the down turn in Operations has affected the business of car hires.
“If you have noticed, I have not been regular at the airport for some time now, because business is no longer flowing at the airport as before. I will not fold my hands and be sitting down doing nothing, so I have to look for other things, so I come when I think there will be something.
“You can see that between 12noon and 1pm, after that segment of flights, when you have few flights arrival, many people will close for the day, and when you wait till evening, flight like Dana may come very late at night, and sometimes, it will not arrive, and by that time, many people will not like to book for commercial vehicle”, he said.
Meanwhile, a travel agent, who wished to be anoyimous, decried the rate at which the airport is going down in terms of flights operations, noting that Port Harcourt airport ought to be competing with the other major airports like Lagos and Abuja.
He queried if such was a calculated attempt to bring the airport to its kneel in terms of flight operations, while other major airports have steady flow of flight operations both for domestic and international.
TheTide observed a continuous distortions in flight movement at the airport. Some of the airlines, like Max air, which many passengers patronize, have completely stopped operations, and no new airline has been added.
Apart from the Air Peace Airline that has maintained some level of stability in operations, other few operators have been involved in either steady rescheduling of flights, cancellation and regular delay, resulting in poor and unpredictable flight movement, which affects or determine other businesses in the airport.

By: Corlins Walter

Continue Reading

Trending