Withdrawal fiasco leaves customers afraid of depositing cash
Regulation leniency and lack of stringent measures from the central bank, National Bank of Ethiopia (NBE), is pinned as one of the primary challenges which have jeopardized cash withdrawals from financial institutions in recent weeks.
As experts now opine, it is of paramount importance that the financial regulator need impose a directive or properly apply the current rules on financial institutions regarding cash withdrawal regulations. As the depressing trend on limiting the cash withdrawal continues, customers have now resorted to keeping money in their own hands in fear of the limits, and as experts warn, this could heavily impact the government policy to expand the saving to GDP ratio.
As financial professionals who keenly follow the matter inform Capital, the majority of banks have now laid down different instruments that hinder depositors from accessing the amount of money they need.
According to the claim, except the state owned financial enterprise, Commercial Bank of Ethiopia (CBE), and some major firms, most of the banks are doing their best to keep the depositors money from being withdrawn by their customers.
The claims further cite that some of the banks have imposed unnecessary competition between their branches as to who can get more volume of cash on hand, “This has resulted in branches not properly handling their customers need and have caused refusal of requested amount of withdrawals as per customer demand.”
As sector experts indicate, only a fraction of banks are in line with the law of NBE with regards to withdrawal limits; that is CBE and very few big banks and those who are new but highly competitive in the banking sector.
“A major portion of the private banks are struggling to keep the money that they hold rolling. Despite some banks adamancy on their liquidity insufficiency, the reality though is far from the case,” sources at one of the biggest banks said.
Experts in the sector also pointed out that settlements between banks has become an uphill task which has made some of the banks to wait for long to access their finance from other parallel banks.
They added that the current situation has forced depositors to hold their cash due to lack of confidence in their banks’ access capability, “This is certainly against the NBE law imposed two years back on the maximum amount of money to be hold on hand.”
According to the NBE law issued in October 2020, the maximum daily cash withdrawal limit for individuals was set at 50,000 birr and 70, 000 birr for a juridical person or an organization.
“The way how some banks are following this recent trend is very dangerous for the national economy since their practice is eroding depositors’ confidence,” sector experts expressed their concern.
“My bank’s ATM machine is mostly hosting other banks cards because their machines are empty or not loaded. This is challenging for us since we are not timely refunded from the other banks,” one of the bank presidents explained.
“The bad thing about liquidity problems is that it is transferable from one to the other. If someone was unable to access their cash on one bank or its machine, they would come to the other bank for access. Even if my bank is healthy, with regards to liquidity, through time it will be burdened by other banks,” he elaborated.
According to sources that closely follow the financial industry, about five private banks are healthily operating as per the normal cash withdrawal guide, in addition to CBE. However, most of the private banks have been noted not to follow suit.
“If you request for 10,000 birr today, they may allow you to get half of it or less than that, which is disappointing for depositors who may demand that amount of money for their urgent payments,” an expert explained.
As one of the, liquid sound, bank presidents underlines, the challenge has arose from excessive disbursement of money as loans through banks. The huge amount of credit allocation is observed on the price of vehicles and land that has suddenly skyrocketed in the past about one year.
“Banks are competing on unnecessary and artificial deposit competition as opposed to prudent operation,” he says, adding, “NBE ought to have strict control of financial firms in connection to the loan-deposit ratio.”
“Even though NBE has a law for the loan deposit ratio to be at 85 percent, the banks are yet to properly enforce that to a tee,” some bankers told Capital.
They said that some of the banks provide over 100 percent of their deposit mobilizations, which means they have disbursed their working capital too.
“This has come to pass as a result of lack of a controlling scheme or severe action from the regulatory body,” a banker explained.
“Some of the banks are also taking loans from NBE through individual banks’ lending facility, which was designed to help commercial banks to meet unexpected liquidity needs, and provide as a credit for their customers,” experts said, adding, “But the regulatory body is yet to be seen taking serious measures on those banks who abuse the scheme”.
As bankers acknowledged, it is crystal clear why the fear of the depositor has come about.
Experts argued that the problem has escalated because the central bank has not been taking the required legal action, “It has rules and regulations that can manage misacts but we are not seeing that.”
Capital’s effort to get further comments on the issue from NBE was unfruitful.
Banks’ liquidity dries out
Nigeria Air to conquer the sky in September courtesy of Ethiopian Airlines
Ethiopian Airlines announces it is planning to commence flights of Nigeria’s national airline, Nigeria Air on September 2023.
According to Ethiopian Airlines CEO, MesfinTasew, despite facing a number of challenges, the airline has not backpedaled from starting operations, “We are preparing and if things go smoothly we are planning to start air Nigeria flights on September. If we face slight delays, we may go until October.”
“We are facing several challenges and hassles of which I believe, it will be ironed out soon,” said the CEO.
Nigerian government had in September 2022 announced Ethiopian Airline as the preferred bidder for the technical partnership on Nigeria Air.
The airline will be a joint venture between Ethiopian Airlines and three Nigerian investors, with Ethiopian Airlines holding a 49percent share a majority controlling stake, Nigerian investors 46 per cent, and the Federal government 5 per cent share.
After being awarded by the government of Nigeria last year, Ethiopian Airlines has started discussions to set up a Nigerian flag carrier which was founded in 1958 and ceased to operate in 2003.
Nigeria air’s official launch was unveiled on May 26th to which the Nigerian government believe the partnership will ensure the success of Nigerian air. However, private carriers within Nigeria were not happy with this arrangement and went to court claiming this new airline would affect their business.
Nigerian airlines composing the Airlines of Nigeria (AON) are pushing back against the large stake that Ethiopian Airlines will hold in Nigeria’s new flagship carrier Nigeria Air. The AON believes the Nigerian flagship carrier should be wholly owned and operated by Nigeria nationals and took the case to Court. The suit, filed on November 11, 2022, opposed the proposed partnership between Ethiopian Airlines and the Federal government of Nigeria, where ET became a majority shareholder in Nigeria Air with a 49% stake after being selected as the preferred bidder to establish the Airline. The court case hindering Nigeria Air’s start involves a group of smaller Nigerian airlines that filed a suit, resulting in a temporary order to suspend the establishment of Nigeria Air.
Ethiopian Airlines has already established a committee to oversee the preparations, and has started the process of obtaining an Air Operator’s Certificate from the Nigerian Civil Aviation Authority.
Nigeria Air would have an initial capital of USD 300 million and plans to have 30 aircraft within four years. Additionally, Ethiopian airlines owns stakes in several other airlines, including 45% in Zambia Airways, 49% in Guinea Airways, 100% in Ethiopia-Mozambique Airlines, 49% in Chad Airlines, and 49% in Air Malawi.
It is well known that Ethiopian Airlines has been working with the government of Nigeria for nearly five years to establish a flag carrier for the West African nation.
IATA calls on Gov’t to clear blocked airline funds
The global trade association of airlines, International Air Transport Association (IATA), commends the strong recovery of Ethiopian airlines from the COVID-19 crisis which has been integral in enhancing regional connectivity in continent. The association also called on the government of Ethiopia to act swiftly to clear the 95 million dollars in airline funds blocked from repatriation to ensure the country’s connectivity.
IATA which held a two day ‘Focus Africa’ conference in Addis Ababa on June 21-22 saw the conference bringing together airline CEOs along with aviation leaders, decision makers and influencers from Africa, the Middle East and the globe, who converged to collaboratively drive the advancement of aviation in Africa.
The conference focused on six priorities including: strengthening aviation’s contribution to the continent’s economic and social development, improving connectivity, safety and reliability for passengers and shippers.
As indicated at the meeting, Ethiopian airline’s regional connectivity in the continent stood at 113% of pre-crisis levels. According to IATA’s Connectivity Index and Passenger traffic originating from Ethiopia tracked at 19% above pre-crisis levels in the first quarter of 2023.
“Ethiopia’s aviation industry is set to triple by 2040, with an average 6% growth in passenger traffic over the next 17 years,” said Willy Walsh, General Director of the IATA.
“Ethiopian Airlines is performing very well. Our current performance, in all parameters, indicates that our success will continue strong. We have recovered well from the impacts of the pandemic. By the end of this fiscal year, we expect to generate USD6.1 billion, this is a 20% growth compared to our last year’s performance. We will be transporting 13.7 million passengers which is also a 55% increase from same period last year,” said Ethiopian Airlines Group CEO, MesfinTasew
“While our operations and milestones continue to be persistent, we still have challenges regarding expatriating our accumulated funds in various countries,
Mesfin stated indicating that the airline is suffering with stranded blocked funds in several countries at over USD180 million.
In complement, IATA’s General Director also called upon the government of Ethiopia to clear airline’s blocked funds stating, “The low allocation of USD to the aviation industry by the Ethiopian Government and Central Bank means that $95 million in airline funds are blocked in the country. It’s time for the government to work with the industry to resolve this situation quickly.”
At the conference, many strongly argued that the implementation of a single African air transport market will be key to unlocking travel within the continent fostering the growth of sustainable aviation fuel /SAF/.
IATA demanded the Ethiopian government to explore developing and incentivizing SAF production as the country has the potential to become one of the biggest SAF producers with unique feed stocks, vast land area, and significant solar potential providing opportunities for both biomass feed stocks and renewable non-biomass feed stocks like solar and wind power-to-liquid (PtL) solutions.
“The Ethiopian government is uniquely positioned to stimulate SAF production, a move that would not only support the forecast surge in air travel but also trigger substantial job creation and boost the local economy. Ethiopia has the opportunity to take the lead, and in doing so, construct an aviation future that is as sustainable as it is successful,” said Walsh.
IATA has also launched the Collaborative Aviation Safety Improvement Program (CASIP) to reduce the accident and serious incident rate across Africa as part of the Focus Africa initiative.
Launch partners in the program are said to be: The International Civil Aviation Organization (ICAO), The African Civil Aviation Commission (AFCAC), The US Federal Aviation Administration (FAA), Boeing, and the Airlines Association of Southern Africa (AASA).
Together, the CASIP partners will prioritize the most pressing safety concerns on the continent and rally the resources needed to address them. The benefits of improving aviation safety in Africa will be spread across the economies and societies of the continent.
“CASIP will make it clear to governments across the continent that aviation must be prioritized as an integral part of national development strategies. With such broad benefits at stake, we hope that other parties will be encouraged to join the CASIP effort,” IATA’s Director General stated.
Over the next 15 years, African passengers’ traffic is expected to double with the greatest potential and opportunity. However, infrastructure constraints, high cost, lack of connectivity, regulatory impediments, slow adoption of global standards and skill shortage are some limitation hindering the growth of the sector in the continent.
Promoting equipment maintenance at the DMP
Doraleh Multipurpose Port (DMP) and China Merchants Port (South China) General Bulk Management Center recently achieved a significant milestone in their partnership, with the aim of reducing downtime and improving the quality of port services. The two entities came together to sign a Memorandum of Understanding (MOU) that focuses on promoting equipment maintenance at the DMP.
The signing ceremony, attended by high-level personalities, emphasized the commitment of both parties to strengthening their collaboration and fostering mutual growth. Chaired by Djama Ibrahim Darar, Managing Director of PDSA/DMP, the ceremony saw the presence of Feng Boming, Executive Vice President of China Merchants Group, and other prominent individuals.
The MOU signifies a strong alliance, combining the expertise and resources of two major players in the maritime industry. Under this agreement, the two organizations will work closely together to optimize equipment maintenance practices at DMP, which is the largest and most modern multipurpose port facility in the region.
“This collaboration is expected to ensure efficient and reliable operations, leading to increased productivity, reduced downtime, and an overall improvement in the quality of port services,” stated DMP in its official statement sent to Capital.
The staff of the technical division of DMP will go to China for an experience sharing program.
The Doraleh Multipurpose Port, inaugurated in May 2017, was specifically designed to alleviate congestion at the former port of Doraleh. In less than a year, waiting times for goods discharge were reduced from weeks to mere days. The DMP has the capacity to accommodate vessels with up to 100,000 DWT and boasts state-of-the-art facilities, making it one of the most advanced ports in Africa.
The port features various terminals, including bulk, break, container, and RoRo (Roll-on/Roll-off), and its impressive quay line stretches 1,200 meters, accommodating six berths with a depth of 15.3 meters. With a direct connection to the Djibouti-Addis Ababa railway, the port maintains an average performance of 90 units discharged per hour (RoRo) and 31 containers per hour (crane lifting).
The total investment in the Doraleh Multipurpose Port amounted to USD 590 million. There are plans for further expansion, with the goal of reaching 4,130 meters of quay line and a total of 17 berths. These developments will further enhance the port’s capacity and contribute to the growth and efficiency of maritime trade in the region.
The partnership between DMP and China Merchants Port (South China) General Bulk Management Center through the signing of the MOU sets a positive trajectory for the future. By focusing on equipment maintenance and operational optimization, the collaboration aims to unlock the full potential of the port, benefitting both local and international stakeholders. As the port continues to evolve and expand, it will play a crucial role in facilitating trade and economic growth in Djibouti and the wider region.
