NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Despite the recovery in oil prices, the (d) New and more diverse types of
general government fiscal deficit is clients continue to enter the market,
projected to widen in 2022 from fuel which require development of
subsidies and higher security spending. new operational procedures and
Government revenue-to-GDP ratio products.
remains among the lowest in the world.
The macroeconomic headwinds All of these trends and many others
continued to create multiplicity of will continue to change the industry,
known and unknown risks, forcing risk eliminating some risks and introducing
managers to delicately navigate the new ones. It is imperative that we
risk minefields like a veteran soldier. understand the operational cycle and
best practices surrounding managing
It is important to acknowledge at risks properly as the financial market
the outset of this section that Risk continues to evolve.
management is constantly evolving.
Regulations are changing, technology For the Group, the outlook was viewed
continues to advance and new exotic as an opportunity to optimize our risk
structures will continually be introduced and governance processes and position
into the Nigerian financial market. Some the Group to benefit from market and
of the major trends that will continue to regulatory developments. In summary,
affect risk management are: it has been a very engaging year of risk
management. Various risk management
(a) Regulatory and financial reform initiatives came to fruition during the
will continue to impact operational period which deepened the range of
processing and is expected to play a risk management tools/processes that
key role in future trends for providing assisted the Group in managing risk over
transparency and the period.
(b) Technology continues to advance Bespoke Enterprise Risk Management
rapidly, enabling businesses to Helping our stakeholders achieve
execute many more transactions their ambitions lies at the heart of our
during periods of market volatility. processes as we apply bespoke risk
management framework in identifying,
(c) Businesses will continue to develop assessing, monitoring, controlling and
new and more exotic types of reporting the inherent and residual risks
transactions especially in FX associated with the pursuit of these
derivatives and oil hedging products. ambitions and ensuring they are achieved
the right way.
Consolidation • Stability • Focus 101
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
As we deepen our presence in the market, rewards are detailed in the Enterprise
proactive Enterprise Risk Management Risk Management (ERM) Framework,
Framework becomes even more critical. which is a structured approach to
identifying opportunities, assessing the
The Group views and treats risks as an risk inherent in these opportunities and
intrinsic part of business and maintains a actively managing these risks in a cost-
disciplined approach to its management effective manner. Specific policies are
of risk. The Risk functions remain also in place for managing risks in the
dynamic and responsive to the needs of different core risk areas of credit, market
stakeholders as it improves its focus on and operational risks as well as for other
the inter-relationships between risk types. key risks such as liquidity, strategic and
It uses periodic reviews of risk exposure reputational risks.
limits and risk control to position itself
against adverse scenarios. To some institutions, risk is viewed as a
threat or uncertainty, but to us, it goes
beyond that. Risk to us, presents potential
The Group’s risk management opportunities to grow and develop
our business within the context of our
architecture, as designed, continued to clearly articulated and Board-driven risk
balance corporate oversight with well- appetite.
defined risk management functions which
fall into one of three categories where
risk must be managed: lines of business, Risk Management Framework
governance & control, and audit. The All activities and processes of the Group
Board of Directors and management of
the Group are committed to constantly involve the identification, measurement,
establishing, implementing and sustaining evaluation, acceptance and management
tested practices in risk management of risk or combinations of risks. The
to match those of leading international Board, advised by the various Board and
organisations. We are convinced that Management Risk Committees, requires
the long-term sustainability of our and encourages a strong risk governance
Group depends critically on the proper culture which shapes the Group’s attitude
governance and effective management of to risk. We believe that risk management
our business. As such, risk management encompasses the insights delivered by
occupies a significant position of information which facilitate appropriate
relevance and importance in the Group. actions. VFD Group benefits from
having enhanced its risk management
Risk strategies and policies are set by the framework, which gives full coverage of a
Board of Directors of the Group. These variety of risks.
policies, which define acceptable levels
of risk for day-to-day operations as well We have a holistic view of all major risks
as the willingness of the Group to assume facing the Group. We remain vigilant with
risk, weighed against the expected regard to both known and emerging risks
102 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
and ensure that we are strong enough Risk management is fundamental
to withstand any exogenous shocks. to the Group’s decision-making and
Our Board-level risk committees play a management process.
critical role in providing oversight of risk
management and ensuring that our risk
appetite and risk profile are consistent It is embedded in the role of all employees
with and support our strategy to deliver via the organizational culture, thus
long-term, sustainable success in enhancing the quality of strategic, capital
achieving our strategic vision. allocation and day-to-day business
decisions.
Risk, by definition, is dynamic in nature.
The management of risk, consequently,
must be evolving, necessitating regular The Group believes that enterprise risk
review of the effectiveness of each management provides the superior
enterprise risk management component. capabilities to identify and assess the full
spectrum of risks and to enable staff at all
We believe that understanding and levels to better understand and manage
managing our risks and continuously risks. This will ensure that:
improving our controls are central to the
delivery of our strategic objectives. The • Risk acceptance is done in a
Board’s risk committees play an active responsible manner;
role in ensuring that we undertake well- • The executive and the Board of
measured, profitable risk-taking activities the Group have adequate risk
that support long-term sustainable management support;
growth. • Uncertain outcomes are better
anticipated;
• Accountability is strengthened; and
Risk Management Philosophy, Appetite • Stewardship is enhanced.
and Objectives
VFDGroup’sRiskmanagementphilosophy
and culture remain fundamental to the Risk Appetite
delivery of our strategic objectives. Risk appetite is an articulation and
Risk management is at the core of the
operating structure of the Group. We seek allocation of the risk capacity or quantum
to limit adverse variations in earnings of risk VFD Group is willing to accept
and capital by managing risk exposures in pursuit of its strategy, duly set and
within our moderate risk appetite. Our approved by the executive committee
risk management approach includes and the Board, and integrated into our
minimizing undue concentrations of strategy, business, risk and capital plans.
exposure, limiting potential losses
from stress events and the prudent The risk appetite metrics were tracked
management of liquidity. against approved triggers and exceptions
were reported to management for prompt
corrective actions. Key issues were also
Consolidation • Stability • Focus 103
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
escalated to the Board Risk Management The Group’s principal financial liabilities
Committee. comprise borrowings and other liabilities.
The main purpose of these financial
Risk management objectives liabilities is to finance the Group’s
The broad risk management objectives operations. The Group’s principal financial
assets include loans and receivables,
of the Group are: other assets (excluding prepayments)
and cash and short-term deposits that
derive directly from its operations. The
• To identify and manage existing Group also holds FVOCI investment
and new risks in a planned and securities.
coordinated manner with minimum
disruption and cost;
The Board of Directors reviews and
• To protect against unforeseen agrees policies for managing each of
losses and ensure stability of the financial risks, which are summarised
earnings; below.
• T o maximize earnings potential and
opportunities;
3.1 Credit risk Management
• T o maximize share price and
stakeholder protection; Credit risk arises from the failure of an
obligor of the Group to repay principal or
• To develop a risk culture that interest at the stipulated time or failure
encourages all staff to identify otherwise to perform as agreed. This risk
risks and associated opportunities is compounded if the assigned collateral
and to respond to them with cost only partly covers the claims made to the
effective actions. borrower, or if its valuation is exposed
to frequent changes due to changing
market conditions (i.e. market risk).
Scope of risks
The scope of risks that are directly
managed by the Group is as follows: The Group’s Risk Management philosophy
is that moderate and guarded risk
• Credit risk attitude will ensure sustainable growth
• Operational risk in shareholder value and reputation.
• Market and liquidity risk Extension of credit in the Group is
• Legal and compliance risk guided by its Credit Policy Guide, which
• Strategic risk sets out specific rules for risk origination
• Reputational risk and management of the loan portfolio.
• Capital risk The Policy also sets out the roles and
104 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
responsibilities of different individuals • Formulating credit policies in consultation
and committees involved in the credit with business units, covering collateral
process. requirements, credit assessment, risk
grading and reporting, documentary and
The goal of the Group is to apply legal procedures, and compliance with
the Group credit policies
sophisticated but realistic credit models
Reviewing and assessing credit risk.
and systems to monitor and manage • Assessing all credit exposures in excess of
credit risk. Ultimately these credit models designated limits, prior to facilities being
committed to customers by the business
and systems are the foundation for the unit concerned. Renewals and reviews of
facilities are subject to the same review
application of internal rating-based process.
approach. Developing and maintaining the Group’s
risk grading in order to categorise
exposures according to the degree of
risk of financial loss faced and to focus
The pricing of each credit granted reflects management on the attendant risks.
the level of risks inherent in the credit. • Providing advice, guidance and specialist
Subject to competitive forces, The Group skills to business units to promote best
practice throughout the Group in the
implements a consistent pricing model management of credit risk.
for loans to its different target markets.
The client’s interest is guarded at all
times, and collateral quality is never the
sole reason for a positive credit decision. •
The Group’s credit process requires
rigorous proactive and periodic review
of the quality of the loan portfolio. This
helps us to identify and remediate credit
issues proactively.
The Board credit Committee is
responsible for oversight of the Group’s
credit risk, including:
Consolidation • Stability • Focus 105
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
An internal credit rating scale is in place to measure the counterparty risk. All customers that
are granted credit are evaluated using the Group’s risk rating model. The rating grid is shown
below:
External Rating Equivalent Grade Risk Rating
AAA Investment 1
AA Investment 2+
A Investment 2
BBB Investment 2-
BB+ Standard 3+
BB Standard 3
BB- Standard 3-
B Non-Investment 4
B- Non-Investment 5
CCC Non-Investment 6
The Group establishes an allowance for impairment that represents its best estimate of
incurred loss in respect of loans and receivables.
The maximum exposure to credit risk (without taking into account any collateral held or other
credit support) at the reporting date is as follows:
Group Cash Investment Loans and Held for **Other Total
and cash securities receivables/ trading financial
At 31 December 2021 equivalents placements N’000 N’000
Neither past due nor N’000 300,172 assets 68,880,647
impaired N’000 25,550,044 N’000
Impaired 300,172 N’000
Gross amount 3,880,378 30,909,632
Impairment allowance 8,240,421
Carrying amount
3,880,378 25,550,044 1,447,921 8,240,421 1,447,921
32,357,553 70,328,568
3,880,378 25,550,044 32,357,553 300,172 8,240,421 70,328,568
At 31 December 2020 N’000 N’000 N’000 N’000 N’000 N’000
Neither past due nor 4,490,804 7,209,167 4,536,532 5,974 6,509,608 22,752,084
impaired
Impaired - - 979,446 - 396,284 1,375,730
Gross amount 4,490,804 7,209,167 5,515,978 5,974 6,905,892 24,127,814
Impairment allowance (979,446) (396,284) (1,375,730)
4,490,804 7,209,167 4,536,532 5,974 6,509,608 22,752,084
Carrying amount
106 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Company Cash Investment Loans and Held for **Other Total
and cash securities receivables/ trading financial
At 31 December 2021 equivalents placements N’000
Neither past due nor N’000 N’000 assets 44,172,295
impaired N’000 4,829,482 N’000 -
Impaired N’000
Gross amount 2,306,643 18,363,351
Impairment allowance 18,672,820
Carrying amount
2,306,643 4,829,482 218,944 150,038 368,982
2,306,643 4,829,482 18,582,295 - 18,822,858 44,541,277
(218,944) (150,038) (368,982)
18,363,351 - 18,672,820 44,172,295
At 31 December 2020 N’000 N’000 N’000 N’000 N’000 N’000
Neither past due nor 4,077,652 1,089,294 7,160,894 - 6,486,137 18,813,977
impaired
Impaired - - - - 276,494 276,494
Gross amount 4,077,652 1,089,294 7,160,894 - 6,762,631 19,090,471
Impairment allowance (276,494) (276,494)
Carrying amount 4,077,652 1,089,294 - - 6,486,137 18,813,977
7,160,894
**includes mutual funds
3.2 Liquidity Risk Management: liquidity risk. Specifically, the Group
adopted the following approaches;
a) Funding and Liquidity plan;
Liquidity risk arises when the Group is b) Gap Analysis; and
unable to meet expected or unexpected c) Ratio Analysis.
current or future cash flows and collateral
needs without affecting its daily The Funding and Liquidity plan defines
operations or its financial condition. The the Group’s sources and channels of
Group is managed to preserve a high utilization of funds. The funding liquidity
degree of liquidity so that it can meet the risk limit is quantified by calculating
requirements of its customers at all times liquidity ratios and measuring/monitoring
including periods of financial stress. the cumulative gap between our assets
and liabilities. The Liquidity Gap Analysis
quantifies the daily and cumulative gap
We analyze and monitor our liquidity in a business-as-usual environment. The
gap for any given tenor bucket represents
risk, maintain excess liquidity and access the borrowings from, or placements to,
diverse funding sources. the market required to replace maturing
Quantifications
VFD Group has adopted both qualitative
and quantitative approaches to measuring
Consolidation • Stability • Focus 107
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
liabilities or assets. The Group monitors events, economic or market conditions,
the cumulative gap as a + or – 20% of the earnings problems or situations beyond
total risk assets and the gap as a + or – its control could cause either a short or
20% of total deposit liabilities. long-term liquidity crisis. It reviews its
contingency funding plan in the light of
Limit management and monitoring evolving market conditions and stress
Active management of liquidity through test results.
the framework of limits and control To monitor liquidity and funding, the Group
presented above is possible only with Treasury prepares a liquidity worksheet
proper monitoring capabilities. The that project sources and uses of funds.
monitoring process focuses on funding The worksheet incorporates the impact
portfolios, the forward balance sheet of moderate risk and crisis situations. The
and general indicators; where relevant worksheet is an integral component of
information and data are compared the contingency funding plan. Although
against limits that have been established. it is unlikely that a funding crisis of any
The Group’s Treasury is responsible significant degree could materialize, we
for maintaining sufficient liquidity by consider it important to evaluate this risk
maintaining sufficient high ratio of liquid and formulate contingency plans should
assets and available funding for near- one occur.
term liabilities. The secured liquidity
measure is calculated and monitored The contingency funding plan covers: the
by risk management. Liquidity risk is available sources of contingent funding
reported to the Board of Directors on a to supplement cash flow shortages;
quarterly basis. the lead times to obtain such funding;
the roles and responsibilities of those
Liquidity risk is strongly related to other involved in the contingency plans; and
financial risks such as credit risk and the communication and escalation
market risks, such as interest rate risk, requirements when early warning
security price risk, etc. indicators signal deteriorating market
conditions. Both short term and long-
Contingency funding plan term funding crises are addressed in the
The Group has a contingency funding contingency funding plan.
plan which incorporates early warning
indicators to monitor market conditions.
The Group monitors its liquidity position
and funding strategies on an ongoing
basis, but recognizes that unexpected
108 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Carrying Contractual 0-90 days 91-180 days 181-365 days Above 365
amount cash flows N’000 days
At 31 December 2021 N’000 N’000
Financial liabilities N’000 N’000 N’000
Borrowings
Funds under management 8,379,397 8,379,397 582,774 2,629,192 5,167,431 -
Other financial liabilities 26,062,482 26,062,482 12,476,110 10,198,249 3,388,123 -
(excluding deposit for 1,632,107 3,122,917
shares) 7,106,371 7,106,371 1,132,156 1,219,190
41,548,250 41,548,250 14,191,041 14,046,631 10,187,661 3,122,917
Financial assets 3,880,378 3,880,378 3,880,378 - - -
Cash and cash equivalents 300,172 300,172 300,172 - - -
Held for trading 737,672 5,247,044 3,871,618 16,026,233
Investment securities 25,716,306 25,882,568 12,648,158 7,072,200 1,547,599
Loans and receivables 30,909,632 32,357,553 11,089,596 818,653 5,017,337 -
Fixed debt placement 2,404,431 1,016,222 1,310,835 4,062,966
Other financial assets ** 8,240,421 8,240,421 3,531,506 19,730,078 17,271,991 21,636,798
9,921,529 9,921,529 21,943,754 (5,683,447) (7,084,330) (18,513,881)
Net liquidity (surplus)/ 78,968,438 80,582,621 (7,752,714)
deficit (37,420,188) (39,034,371)
Group Carrying Contractual 0-90 days 91-180 days 181-365 days Above 365
amount cash flows N’000 days
At 31 December 2020 N’000 N’000
Financial liabilities N’000 N’000 N’000
Borrowings
Other financial liabilities 7,366,177 7,366,177 4,199,793 401,962 6,038,313 5,103,808
(excluding deposit for 27,724,955 27,724,955 2,281,096 181,034 8,380 31,722
shares)
35,091,132 35,091,132 6,480,889 582,996 6,046,693 5,135,530
Financial assets 4,490,804 4,490,804 4,490,804 - - -
Cash and cash equivalents 5,974 5,974 5,974 - - -
Held for trading - - - 1,333,704
Investment securities 7,209,167 7,209,167 256,662 1,460,689 266,176
Loans and receivables 4,475,486 12,270,561 2,895,497 - - -
Fixed debt placement 61,046 1,126,083 697,564 50,000
Other financial assets ** 2,541,721 2,541,721 1,382,745 2,158,253 1,649,880
6,509,608 6,905,892 5,032,245 (799,749) 3,888,440 3,485,650
Net liquidity (surplus)/ 25,232,759 33,424,118 12,485,566
deficit 9,858,372 (6,004,677)
1,667,013
Consolidation • Stability • Focus 109
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Company Carrying Contractual 0-90 days 91-180 days 181-365 days Above 365
amount cash flows N’000 days
At 31 December 2021 N’000 N’000
N’000 N’000 N’000
Financial liabilities
Borrowings 33,536,150 33,536,150 9,483,957 2,342,892 6,155,076 15,554,224
Other financial liabilities 9,327,757 9,327,757 1,723,233 1,840,650 2,691,446 3,072,428
(excluding deposit for
shares)
42,863,907 42,863,907 11,207,190 4,183,542 8,846,522 18,626,652
Financial assets 2,306,643 2,306,643 2,306,643 - - -
Cash and cash equivalents 23,502,301 23,652,339 452,127 4,829,482 3,186,471 15,184,259
Investment securities 14,761,365 14,980,309 3,218,458 3,930,031
Loans and receivables 7,456,043 3,601,986 375,778
Fixed debt placement 3,601,986 3,601,986 - - 1,016,617 -
Other financial assets ** 6,956,408 6,956,408 895,123 11,735,106
51,128,703 51,497,685 1,459,697 8,943,062 (2,888,583) 3,584,970
Net liquidity (surplus)/ (8,264,797) (8,633,779) 11,674,510 4,759,520) 19,145,007
deficit (467,320)
(518,355)
Company
Carrying Contractual 0-90 days 91-180 days 181-365 days Above 365
At 31 December 2020 amount cash flows N’000 days
Financial liabilities N’000 N’000
Borrowings N’000 N’000 N’000
Other financial liabilities
(excluding deposit for 12,643,657 12,643,657 1,860,069 - 5,679,780 5,103,808
shares) 2,546,635 2,546,635 2,546,635 -- -
15,190,292 15,190,292 4,406,704 - 5,679,780 5,103,808
Financial assets 1,185,918 1,185,918 1,185,918 - - -
Cash and cash equivalents 1,089,294 1,089,294 - - - 1,089,294
Investment securities 1,203,873 1,203,873 - -
Loans and receivables 1,203,873 - - -
Fixed debt placement 719,902 719,902 719,902 839,236 658,023 -
Other financial assets ** 6,170,722 6,447,216 839,236 658,023 -
10,369,709 10,646,203 4,949,957 (839,236) 5,021,757 1,089,294
Net liquidity (surplus)/ 4,820,583 4,544,089 8,059,650 4,014,514
deficit (3,652,946)
110 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
3.3 Market Risk Management Depending on the market conditions and
risk outlook, recommendations are made
to the risk management committees in
VFD Group is faced with the risk of respect of the market risk profile, risk
decline in its earnings and capital appetite appraisal, as well as review of
arising from adverse changes in market limits against actual position.
variables, such as interest rate and foreign
exchange rate. Market Risk is the risk
that the value positions will be adversely The Group regularly conducts stress
affected by movements in equity prices, testing to monitor its vulnerability to
interest rates, currency exchange rates unfavorable shocks. It monitors and
and commodity prices. controls its risk, using various internal
and regulatory risk limits.
Market Risk Management: Policy and
Interest rate risk
control Interest rate risk is the exposure of the
Over the years, the Nigerian financial Group’s financial condition to adverse
movements in interest rates, yield curves
market has witnessed a dramatic and credit spreads.
expansion in the array of financial services
and products. This tremendous growth The Group’s exposure to interest rate
in scale and scope has also generated risk is minimal as it does not invest in
new risks with global consequences, floating rate securities and its fixed rate
especially market risk, necessitating an placements are with banks and other
assessment of exposures to the volatility financial institutions.
of the underlying risk drivers.
These developments have prompted Re-pricing and Liquidity Gap Analysis
a comprehensive and dynamic Market The Group’s objective for management
Risk Policy, to ensure that risks faced of interest rate risk to ensure a higher
across business activities and on an degree of interest rate mismatch margin
aggregate basis are within the stipulated stability and lower interest rate risk over
risk appetite of the Group. These policies an interest rate cycle.
have been benchmarked with industry
and international best practices. The Group’s operations are subject to
the risk of interest rate fluctuations to
The Board approves the risk appetite the extent that interest-earning assets
and risk limits are set within the context and interest-bearing liabilities mature or
of the approved market risk appetite. re-price at different times or in differing
Limits are set based on the approved risk amounts. In the case of floating rated
appetite, underlying liquidity as well as assets and liabilities.
legal limitations on individual positions
imposed by the regulatory authorities in
Nigeria.
Consolidation • Stability • Focus 111
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Sensitivity Analysis Dealer Limits: This limit sets a maximum
Interest-rate risk is monitored with a Gap tolerable position exposure for a specific
dealer.
report. A limits framework is in place to
ensure that retained risk remains within Mark-to-Market (MTM)
approved appetite. The marking-to-market technique
establishes historical profit/loss by
revaluing money market exposures to
Sensitivity Analysis and Stress Testing prevailing market prices.
Sensitivity analysis and stress testing
Stress testing
are risk measurement techniques that The stress testing methodology
help us ensure that the risks the Group
takes remain within our risk appetite assumes that scope for management
and that our level of capital remains action would be limited during a
adequate. Sensitivity analysis involves stress event, reflecting the decrease
varying a single factor (e.g. a model in market liquidity that often occurs.
input or specific assumption) to assess
the impact on various risk measures.
Stress testing generally involves Stress testing is an integral part of the
consideration of the simultaneous market risk management framework and
movements in a number of risk factors. It considers both historical market events
is used to measure the level of potential and forward-looking scenarios. Stress
unexpected losses for Credit, Market, testing provides an indication of the
Operational and Liquidity Risks potential size of losses that could arise
in extreme conditions. It helps to identify
risk concentrations across business
Limits lines and assist senior management
Specific limits and triggers (regulatory in capital planning decisions.
and in-house) have been set across Stress scenarios are regularly updated
the various market risk areas to to reflect changes in risk profile and
prevent undue exposure and the economic events. Regular stress test
market risk management exist; scenarios are applied to interest rates,
credit spreads and exchange rates
Stop Loss Limit: This limit sets a Financial instruments affected by market
maximum tolerable unrealized profit/loss risk include borrowings, deposits and
to date which will trigger the closing of FVOCI investments.
a position in order to avoid any further
loss based on existing exposures.
Positions are liquidated uniformly
when stop loss limits are breached.
112 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Currency risk • to provide adequate returns to
The Group’s transactions are denominated shareholders by pricing products and
services commensurately with the
in Naira but it maintains domiciliary level of risk.
accounts in foreign currencies, United
States Dollar and Pound Sterling. However,
the Group’s exposure to currency risk is The Group’s sources of capital comprise
negligible because its foreign currency
balances are insignificant. equity and borrowings (short term fixed
debt takings from customers). The Board
3.4 Capital management of Directors has overall responsibility for
VFD Group Plc is in the business of managing the Group’s capital. The Group
investing in securities either in its name sets the amount of capital in proportion
or the name of any nominee. The Group to risk. In order to manage or maintain
has subsidiaries that provide finance to the capital structure, the Group may
customers. issue new shares, accept more takings
from customers or adjust the amount of
The Group’s objectives in managing dividends paid to shareholders.
capital are:
• to ensure that the Group continues
as a going concern so that it can
continue to provide returns for its
shareholders and benefits for other
stakeholders, and
The Group’s gearing ratio as at the end of the reporting period was as follows:
Group 2020 Company 2020
2021 =N=' 000 2021
=N=' 000 =N=' 000 =N=' 000
Borrowings 8,379,397 15,743,876 33,536,150 12,643,657
Equity 14,868,859 5,982,102 14,100,390 4,804,733
Gearing ratio
56% 263% 238% 263%
Consolidation • Stability • Focus 113
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
3.5 Operational Risk Management the markets in which we operate, our
capital and liquidity, and the competitive,
Operational risk is the risk of loss economic and regulatory environment.
resulting from inadequate or failed
internal processes, people, or systems, Our operational risk strategy seeks to
or from external events. Our definition of minimise the impact that operational risk
operational risk excludes regulatory risks, can have on shareholders’ value.
strategic risks and potential losses related
solely to judgments with regard to taking In order to create and promote a culture
credit, market, interest rate, liquidity, or that emphasizes effective operational
insurance risks. management and adherence to operating
controls, there are three distinct levels of
It also includes the reputation and operational risk governance structure in
franchise risk associated with business VFD Group
practices or market conduct in which
the Group is involved. Operational risk Level 1 refers to the oversight function
is inherent in the Group’s business carried out by the Board of Directors,
activities and, as with other risk types, is Board risk committee and the executive
managed through an overall framework management. Responsibilities at this level
designed to balance strong corporate include ensuring effective management
oversight with well-defined independent of operational risk and adherence to the
risk management. approved operational risk policies.
This framework includes: Level 2 refers to the management
function carried out by operational risk
• recognized ownership of the risk by management. It has direct responsibility
the businesses. for formulating and implementing the
• oversight by independent risk Group’s operational risk management
management; and framework including methodologies,
• independent review by Audit. policies and procedures approved by the
Board.
We seek to minimise exposure to
operational risk, subject to cost trade-offs. Level 3 refers to the operational function
Operational risk exposures are managed carried out by all business units and
through a consistent set of management support functions in the Group. These
processes that drive risk identification, units/functions are fully responsible and
assessment, control and monitoring. accountable for the management of
operational risk in their units. They work in
The goal is to keep operational risk liaison with operational risk management
at appropriate levels relative to the to define and review controls to mitigate
characteristics of our businesses and identified risks. Internal audit provides
114 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
independent assessment and evaluation of While all operational risks cannot be
the Group’s operational risk management eliminated, they can be managed by
framework. This periodic confirmation of instituting strong control framework and
the existence and utilization of controls by monitoring and responding timely
in compliance with approved policies and to potential risks. Such controls include
procedures, provide assurance as to the documentation of processes, controls
effectiveness of the Group’s operational and procedures, segregation of duties,
risk management framework. reconciliation and other management
review procedures.
3.6 Classification category of financial assets and financial liabilities
The classification category of financial assets and liabilities, together with the carrying
amounts shown in the statement of financial position, are as stated below:
Group Cost Amortised Fair value Fair value Total carrying
cost through P through OCI amount
At 31 December 2021 Notes
Cash and bank balances N’000 N’000 or L N’000 N’000
Held for trading 15 N’000
Fixed placement 19.3 3,880,378 - - 3,880,378
Mutual funds 19.2 - - - - 300,172
Loans and receivables 19.2 - - 300,172 8,240,421
19.1 - - - 8,240,421
Investment securities - - - -
Other financial assets 19.2 30,909,632 -
24 - 1,917 - 19,924,739 30,909,632
Borrowings 8,211,969 - - 19,926,656
Other financial liabilities 12,092,347 -
30,911,550 - 28,165,160 8,211,969
300,172 71,469,229
27 - 8,379,397 - - 8,379,397
- - 7,106,371
28 7,106,371 - - - 15,485,768
7,106,371 8,379,397
Consolidation • Stability • Focus 115
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Notes Cost Amortised Fair value Fair value Total carrying
cost through P through OCI amount
At 31 December 2020 15 N’000
Cash and bank balances 19.3 1,461,325 N’000 or L N’000 N’000
Held for trading 19.2 - - 1,461,325
Fixed placement 19.2 - - N’000 -
Mutual funds 19.1 - - 2,393
Loans and receivables 19.2 - 61,046 - 61,046
Investment securities - - 2,393 433,053 433,053
Other financial assets 24 - - 4,475,486
6,076,555 4,475,486 - 1,333,704
Borrowings 27 7,537,880 - - 1,333,704 6,076,555
Other financial liabilities 28 - - -
- 13,843,562
Company Notes 4,536,532 - 1,766,757
At 31 December 2021 15 2,393
Cash and bank balances 19.2
Fixed placement 19.2 - 15,743,876 - - 15,743,876
Mutual funds 19.1 2,502,232 - - - 2,502,232
Loans and receivables 19.2 2,502,232 - - 18,246,108
Investment securities 15,743,876
Other financial assets 24
Cost Amortised Fair value Fair value Total carrying
Borrowings 27 cost through P through OCI amount
Other financial liabilities 28 N’000
N’000 or L N’000 N’000
At 31 December 2020 2,306,643
Cash and bank balances - - N’000 - 2,306,643
Fixed placement - - 3,601,986 3,601,986
Mutual funds - - -
Loans and receivables - 14,761,365 - 300,172 300,172
Investment securities 4,831,399 - - 14,761,365
Other financial assets 4,981,183 - - 23,202,129
7,287,826 19,592,764 - 18,370,730
Borrowings - - 4,981,183
Other financial liabilities 49,153,479
- 22,272,889
- 33,536,150 - - 33,536,150
9,327,757 33,536,150 9,327,757
9,327,757
- - 42,863,907
N’000 N’000 N’000 N’000 N’000
- - 1,185,918
15 - 1,185,918 - - 1,203,873
19.2 - 1,203,873 - 315,415 315,415
- - 719,902
19.2 - - - 1,089,294
854,268 6,170,722
19.1 - 719,902
19.2 - 235,026
24 6,170,722 -
6,170,722 3,344,719 - 1,169,683 10,685,124
27 - 12,643,657 - - 12,643,657
- - 6,012,631
28 6,012,631 - - - 18,656,288
6,012,631 12,643,657
116 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
The fair values of cash and cash equivalents, can also be defined as the risk associated
loans and receivables, other financial assets, with future business plans and strategies,
borrowings and other financial liabilities are including plans for entering new business
not expected to be materially different from lines, expanding existing services through
their carrying amounts due to the short-term mergers and acquisitions, and enhancing
nature of these instruments. infrastructure.
Information Security and Continuity of Strategic risk management involves various
Business organizational functions within the Group.
Information security and the protection of The following principles govern the Group’s
confidential and sensitive customer data strategic risk management:
are a priority of VFD Group. The Group has
developed and implemented an Information The Board and executive management are
Security Risk Management framework that responsible for Strategic risk management
is in line with best practice. The framework is and oversees the effective functioning of the
reviewed and enhanced regularly to address strategic risk management framework; The
emerging threats to customers’ information. functional units (i.e. the units which carry
out business or operational functions) assists
The Group mitigates business continuity the Board and executive management in
risks by reviewing and testing recovery formulating an implementing strategies, and
procedures. in providing input to the strategic planning
and management processes; and as well as
Strategic Risk Management implementing the strategic risk management
We define Strategic Risk as the process for framework.
identifying, assessing and managing risks
and uncertainties, affected by internal and The strategic risk management functions
external events or scenarios that could inhibit support the Board and senior management
the Group’s ability to achieve its strategy and in managing strategic risk and other related
strategic objectives with the ultimate goal processes in the Group.
of creating and protecting shareholder and
stakeholder value. It is a primary component Strategic plans are approved and monitored
and necessary foundation of our Enterprise by the board. Regular environmental scan,
Risk Management. business strategy sessions and workshops
are set up to discuss business decisions,
Strategic risk management, therefore, is close monitoring to ensure that strategic
defined as current or prospective risk to plans are properly aligned with the business
earnings and capital arising from adverse model, regular performance review by EXCO,
business decisions, improper implementation business plans are approved by the board.
of decisions or lack of responsiveness to
changes in the business environment. It
Consolidation • Stability • Focus 117
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Reputational Risk Management
Reputational risk arises when the Group’s reputation is damaged by one or more reputational
events from negative publicity about the organization’s business practices, conduct or financial
condition. The Group’s Strategic and Reputational Risk Management is mandated to protect the
Group from potential threats to its reputation.
VFD Group takes the management of reputational risks seriously because of their far-reaching
implications.The effects of the occurrence of a reputational risk event include but are not limited
to the following:
• Loss of current or future customers;
• Loss of public confidence;
• Loss of employees leading to an increase in hiring costs, or staff downtime;
• Reduction in current or future business partners;
• Regulatory sanctions;
• Increased costs due to government regulations, fines, or other penalties; and
The desired risk appetite for reputation is low risk. The Group will ensure that highest ethical
standards are followed at all times and the code of conduct policy will be strictly implemented.
118 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
4 Interest and Similar Income 2,404,399 2,305,698 2,287,610 1,143,899
Loans and Advances 2,197,446 479,926 1,130,051 243,854
Placement 48,841 78,273
Treasury Bills 2,402,461 823,510 - 68,077
Interest from investment 379,901 177,610
7,053,147 3,687,407
3,797,562 1,633,440
5 Interest and Similar Expense 4,589,647 641,107 4,020,350 954,421
Fixed debt takings 218,062 - - -
Placements 236,791 - - -
Commission expense - -
Loans & Overdraft 95,119 39,533 - 28,038
Time deposits - 300,588 - -
Savings accounts - - -
Interest from investment 33,105 -
Other cost of sales 2,488,754 28,700 4,020,350
982,459
7,628,374 1,043,033
6 Net Trading Income 1,856,386 25,357 1,692,285 25,357
Brokerage fee 856,304 965,058 856,304 965,058
Business support 685,365 1,698,809 685,365 1,698,809
Derivative income 186,398 113,200
(Loss)/ gain on disposal of financial assets (8,073) 43,397
investment income 586,482 57,154 20,528 17,529
Disposal of asset 2,266,917 7,074 138,817 7,074
7 Other income 6,243,381 2,939,850 3,436,696 2,827,027
Fees and commission income
Gains from disposal of shares 805,892 345,304 - -
Exchange Gain/(Loss) - 7,324 - -
Dividend income 365,503 491,007
Disposal of investment property 372,514 503,164 303,465 80,282
Provision no longer required 291,688 64,504 785,206 137,077
Rental Income 785,206 172,077 - 396,679
Others 562,452 - -
3,238 681,228 -
1,230,970 -
- 2,135,403 1,105,045
1,297,179
1,654,825
4,786,687
Consolidation • Stability • Focus 119
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
8 Net (loss)/gain from financial assets at fair - 74,531 - 74,531
valued through profit or loss - 74,531 - 74,531
Net (loss) on equity instruments designated
as FVTPL 1,232,861 981,954 279,354 293,729
77,702 51,967 26,095 25,935
9 Personnel expenses 653,197 79,500
Staff cost 1,033,921 335,065
Contributions to defined contribution plans 1,963,760 640,514 399,164
Other staff costs
37,487 16,578 18,624 7,990
10 Other operating expenses 68,517 32,466 24,000 15,000
Repairs & Maintenance 434,290 118,021 273,842 95,201
Auditors remuneration 285,140 63,522 238,095 48,773
Professional fees 920,075 25,251
Travel and accommodation 82,354 - 3,651
Business development 365,921 5,119 44,029 144
Insurance 108,338 314,291 229,803
General administrative expenses 92,364 79,487 68,016 219,994
Advertisement and branding 32,061 17,499 32,390
Donations 68,742 12,135
AGM/Dividend processing expenses 107,190 11,668 22,267 17,192
Bad debt written off 44,822 - 8,708
Rent and rates 85,926 -
Directors fees and other allowances 86,049 56,011 -
Subscription - 25,348 8,500 62,596
Printing and stationeries 75,967 50,975 38,894 15,000
Office running expenses 41,534
Utilities 9,017 4,750 -
Fines and penalties 4,631 270,985 102,172 -
IT license and maintenance fee 268,168 236,800
Exchange loss 5,911 3,161 9,984
Bank charges 42,935 41,458 - -
Other Expenses 314,235 38,630 40,828
Provision for other assets 15,329
- 338 15,071
32,924 12,141 -
3,454,091 1,904
7,431 19,652
31,465 - -
1,175,747
1,277,416 5,606
886,130
120 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
11 Income tax expense 414,553 715,463 180,750 434,253
Recognised in the profit or loss - 53,049 - 34,632
Income tax - 40,533 - 29,955
Education tax - - 151
Information technology tax - 416 - 197
Police trust fund (11,533) 499,189
Prior year under provision 414,554 797,929 180,750
114,815 (71,570) - (111,727)
12 Depreciation and amortisation
Ofiice Equipment 529,369 726,360 180,750 387,462
Furniture and fittings
Leasehold asset 537,005 - 41,287 32,645
Motor vehicle -
Amortisation of Software - - 18,939 11,523
-
13 Investment in Associates - 20,323 15,469
At 1 January 54,677
Additions during the year - 98,097 72,442
Share of profit using equiy method 591,683
At 31 December - 8,962 7,292
For the year ended 31 December 2021 - 187,608 139,371
14 Earnings per share 3,878,151 -- -
Basic earnings per share 3,878,151 - 3,878,151 -
Basic earnings attributable to shareholders -- -
(N'000) - 3,878,151 -
Number of ordinary shares in issue ('000)
Basic earnings per share (kobo) 3,406,607 3,349,292 3,055,566 2,599,705
15 Cash and cash equivalents 126,685 119,233 126,685 119,233
Cash in Hand 2,689 2,809 2,412 2,180
Balance with banks and other financial
institution 257 9,762 - -
3,880,121 4,481,042 2,306,643 4,077,652
3,880,378 4,490,804 2,306,643 4,077,652
Consolidation • Stability • Focus 121
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisitions, including
cash in hand, deposits held at call with other banks and other short-term highly liquid investments with original maturities
less than three months.
All bank balances and money market placements are assessed to have low credit risk at each reporting date as they are held
with reputable financial institutions.
16 Statutory Deposit
1,780 - - -
The statutory deposits are arising from the Anchoria Investment and Securities Limited. The deposit is held with the
Nigerian Stock Exchange, and the Central Securites clearing system (CSCS)
17 Special Placement with CBN
- 25,000,000 - 25,000,000
- 25,000,000 - 25,000,000
18 Funds Under Management 11,311,525 11,423,349 --
Fixed Debt Placement 3,859,060 1,369,065 --
Investment Securities --
Deposit for shares - - --
Total Balance 15,170,586 12,792,414
19 Investment in Financial Assets 35,253,279 3,999,457 19,373,819 9,884,788
27,998,898 12,270,561 21,822,679 8,112,721
Financial assets measured at amortised cost
- (Note 19.1) 300,172 5,974 300,172 -
63,552,349 16,275,992 41,496,668 17,997,509
Financial assets measured at Fair value
through other comprehensive income -
(Note 19.2)
Financial assets measure at Fair value
through profit or loss - (Note 19.3)
19.1 Financial assets measured at amortized 5,789,650 3,999,457 4,829,482 3,999,457
cost 30,909,632 12,270,561 14,761,365 5,745,543
Investment in Debt Securities
Loans and receivables 1,917 804,341 1,917 249,610
Treasury bills
36,701,198 17,074,359 19,592,763 9,994,610
Loss allowance on financial assets at (1,447,921) (979,446) (218,944) (109,822)
amortized costs (Note 19.1a)
122 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
35,253,278 16,094,913 19,373,819 9,884,788
19.1a Loss allowance on financial assets at
amortized costs
At 1 January 109,822 - 109,822 -
Charge during the period: - 752,711 - -
(Write Back) allowance on loan to customers 1,338,099 226,735 109,122 109,822
Loss allowance on other financial assets 1,447,921 979,446 218,944 109,822
Financial assets measured at amortized cost are assessed to have low credit risk at each reporting date based on their
respective external credit ratings. As such, the Group assumes that the credit risk on these financial instruments have not
increased significantly since initial recognition as permitted by IFRS 9 and recognises 12 month ECL for these assets. There
was additional impairment of N1.3bn on financial assets during the year ended 31st December 2020.
19.2 Fair Value Through Other Comprehensive
Income (FVTOCI)
Quoted Equity Instrument 3,720,699 4,232,899 3,186,471 4,232,899
Unquoted Equity Instrument 16,204,039 2,297,893 15,184,259 2,297,893
Fixed Debt Placements 2,541,721 3,601,986
Proprietory Investment 8,240,421 1,415,351
Mutual funds - 484,750 - -
- 367,571
Less: Fair value adjustments (19.2a) 21,972,717 288,616
28,165,160 9,924,834 (150,038) 8,234,759
(166,262) (125,966) 21,822,679 (122,038)
27,998,898 9,798,868 8,112,721
19.2a Changes in fair value reserve
At 1 January
Arising during the year 125,967 203,755 122,038 -
40,295 (77,788) 28,000 122,038
At 31 December 166,262 125,967 150,038 122,038
19.3 Fair Value Through Profit or Loss (FVTPL)
Investment in mutual funds
300,172 - 300,172 -
Fair value changes 300,172 - 300,172 -
5,974 -
- 5,974 - -
300,172 300,172
Consolidation • Stability • Focus 123
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
20 Investment in subsidiaries Holding 2021 Value 2020 Value Country
N’000 N'000
Investment in VFD Group Plc 99% 41,354 19,998 Nigeria
VFD Bridge Limited 99% 57,236 57,236 Nigeria
Everdon Bureau De Change Limited 90% Nigeria
VFD Microfinance Bank Limited 84% 954,000 954,000 Nigeria
Anchoria Asset Management Limited 55% 417,500 417,500 Nigeria
Kairos Capital Limited 58% 146,850 146,850 Nigeria
Dynasty Real Estate Limited 53% 818,542 818,541 Nigeria
Anchoria Investment Securities Limited 67% 190,924 - Nigeria
Atiat Insurance Brokers 42% 250,000 - Nigeria
Atiat Leasing Limited 100% 55,000 - Nigeria
VFD Tech Limited -
1,250,000
2,414,124
4,181,406
20.1 Non-controlling interest of subsidiaries
The Group did not have any subsidiary that has material non-controlling interest as at the reporting period.
20.2 Significant restrictions
The group does not have significant restrictions on its ability to access or use the assets and settle the liabilities of any
member of the Group other than those resulting from the subsidiaries’ supervisory frameworks. Disclosures on liquidity,
capital adequacy and credit risk were disclosed in the enterprise risk management.
124 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Property, plant and Furniture & Motor Plant & Leasehold Office Computer Right of Land and Total
equipment Fittings vehicles Equipment Building
Machinery Improvement Equipment Used Asset
21 (i) Group
Cost =N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000
At 1 January 2021
Additions 36,916 222,839 137 19,548 96,415 - 37,814 413,669
Disposals 92,883 524,165 1,432,826 224,275 42,113 60,407 - 2,376,670
At 31 December
2021 129,799 747,004 137 1,452,374 320,690 42,113 98,221 -
- 2,790,340
Depreciation 17,081 40,399 137 13,656 42,015 - 12,723 126,011
At 1 January 2021 45,979 289,197 1,067,890 119,776 15,616 45,974 - 1,584,433
Additions 63,060 329,596 137 1,081,546 161,791 15,616 58,697 -
- 1,710,443
Disposals
At 31 December
2021
Carrying amounts 66,739 417,408 - 370,828 158,899 26,497 -
41,238 307,836 1,321,991
At 31 December 0 31,564 78,292 2,395 1,079,896
2021 1,808,409
At 31 December
2020
(ii) Company Furniture & Motor Plant & Leasehold Office Computer Land and
Cost Fittings vehicles Equipment Equipment Building
At 1 January 2021 54,918 325,806 Machinery Improvement 1,061,183 Total
Additions 31,570 98,501 113,016 - 1,612,554
Disposals - - 57,632 26,120 - -
At 31 December 2021 - (1,061,183) 156,191
86,488 -- 139,137 - (1,061,183)
424,306 -
- 707,563
- 57,632
Depreciation
At 1 January 2021 18,044 88,343 - 28,672 53,490 - - 188,549
Additions 18,939 98,097 - 20,323 41,287 - - 178,646
Disposals -- - - --
At 31 December 2021 36,984 186,440 - 48,995 94,776 - - 367,195
Carrying amounts 49,505 237,866 - 8,637 44,359 - - 340,367
36,874 237,462 - 1,061,183 1,424,005
At 31 December 2021 - 28,960 59,526
At 31 December
2020
Consolidation • Stability • Focus 125
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
22 Intangible assets Group Company
Purchased software =N=' 000 =N=' 000
Cost
At 1 January 2021 148,210 111,113
Addition 562,493 -
At 31 December 2021 710,703
111,113
Amortization 35,203
At 1 January 2021 62,679 12,443
Addition 97,882 8,962
At 31 December 2021 21,405
612,822
Carrying amounts 89,708
At 31 December 2021 Group
=N=' 000 Company
22b Intangible assets =N=' 000
Purchased software 81,724
Cost 66,486 54,968
At 1 January 2020 148,210 56,145
Addition 111,113
At 31 December 2020 17,872
17,331 5,151
Amortization 35,203 7,292
At 1 January 2020 12,443
Addition 113,006
At 31 December 2020 98,669
Group
Carrying amounts =N=' 000 Company
At 31 December 2020 =N=' 000
6,080,258
23 Investment Property and Development Property 4,743,800 3,825,175
4,743,800
Cost 696,378
At 1 January 2021 (6,950,000) 770,226
Addition 4,570,436 (6,950,000)
Fair value gain
Reclassification to investment in Herel 4,570,436 2,389,201
At 31 December 2021 6,080,258
2,389,201
Carrying amounts 3,825,175
At 31 December 2021
At 31 December 2020
126 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
24 Trade receivables & Prepayments 1,571,529 3,627,153 1,387,450 3,460,461
Account receivables 221,316 114,738 48,954 69,827
Prepayments 931,326 -
Due from related entities 895,123 794,920 1,016,617
Derivative Assets 430,279 895,123 430,279
WHT receivable 687,580 63,484 -
Other receivables 1,360,715 68,726
Receivable from stockbrokers 1,021,980 293,152 8,763 28,175
Deposit for shares 3,601,628
71,357 3,584,970 71,357
Loss allowance on trade receivables (note 10,291,198 5,400,325 7,005,362 4,060,099
24.1) (148,352)
(26,762) - -
10,142,845 5,373,563 7,005,362 4,060,099
24.1 Loss allowance on trade receivables
At 1 January
26,762 396,284 276,494 -
Provision no longer required - - - -
Arising during the year 121,590 (369,522) (276,494) 276,494
At 31 December 148,352 276,494
26,762 -
The Group applies the simplified approach and recognises lifetime ECL for trade receivables using a provision matrix. The
provision matrix is based on the historical observed default rates, adjusted for forward looking estimates. At each reporting
date, the historical observed default rates are updated.
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
25 Deferred tax - (Asset) 117,076 5,349 95,944 (15,783)
Deferred tax assets: 114,815 111,727 - 111,727
– Deferred tax asset to be recovered after 244,521 117,076 95,944 95,944
more than 12 months
Deferred tax liabilities: 12,630 25,756 - 15,783
– Deferred tax liability to be recovered after
more than 12 months (12,630) (13,126) - (15,783)
Charge for the year - 12,630 --
Total
Consolidation • Stability • Focus 127
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
26 Funds Under Management 21,299,938 22,604,095 --
Fixed Debt Placement 4,762,544 2,644,682 --
Investment Securities 26,062,482 --
25,248,777
27 Borrowings
Borrowings from Related Parties 7,040,337 5,271,773 28,238,117 22,097,410
Other Borrowed Funds 1,172,686 474,804 0 63,986
Other deposits 166,375 1,619,600 -
7,366,177 5,298,033
27.1 Other borrowed funds 8,379,397 33,536,150 22,161,396
At 1 January
Loan from commercial bank Group Company
Repayment during the year
Bank Overdraft 31 December 31 December 31 December 31 December
Car loan
At 31 December 2021 2020 2021 2020
28 Other liabilities =N=' 000 =N=' 000 =N=' 000 =N=' 000
Other financial liabilities:
Due to related entities 474,803 5,114,622 63,986 6,165,641
Accounts payable - 1,051,019 - -
Other non-financial liabilities (25a) (6,101,655)
Accrued expenses (402,117) (63,986) (6,101,655)
Other payables 1,100,000 410,817
28a Other financial liabilities 1,172,686 474,803 - 63,986
Swap liability
Eurobond liability 4,452,644 1,174,568 1,233,471 1,341,306
Debt note 7,106,371 27,724,955 9,327,757 27,106,982
Commercial paper 3,004,901
Other financial liabilities 9,590,867 169,274 39,510
894,226 52,913
29,068,797 28,487,798
3,840,574 13,619,042
25,884,681
1,114,422 -- -
3,004,901 - 3,004,901 -
1,502,700 -- -
3,482,378 -- -
-- -
486,466 - 3,004,901 -
9,590,867
128 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
29 Deposit liabilities 3,059,670 - --
Current deposits 3,206,551 - --
Savings deposits 19,549,628 - --
Term deposits - --
Unclaimed deposits 4,158
- --
25,820,007
30 Current tax liabilities 499,038 258,076 499,038 56,535
Per statement of financial position: 529,369 797,929 180,750 499,189
At 1 January (210,985) (243,639) 151,920 (56,686)
Charge for the year
Tax paid - - - -
Opening balance of new subsidiary
At 31 December 817,421 812,396 527,869 499,038
The charge for income tax in these financial statements is based on the provisions of the Companies Income Tax Act 2020
as amended, while Education Tax is based on Tertiary Education Trust Fund (Establishment etc) Act, 2011.
Group Company
31 (i) Share capital 31 December 31 December 31 December 31 December
The share capital comprises: 2021 2020 2021 2020
(i) Authorised -
=N=' 000 =N=' 000 =N=' 000 =N=' 000
shares of 50k each
- 150,000 150,000 150,000
(iI) Issued and fully paid -shares of 50k each 59,616 59,616 59,616 59,616
At 1 january 3,726 - 3,726 -
Rights issue 63,342 63,342
59,616 59,616
32 Share Premium 3,822,062 3,822,062 3,822,062 3,822,062
At 1 january 4,090,037 3,822,062 4,090,037 3,822,062
Rights issue 7,912,098 7,912,098
At 31 December
33 Retained earnings 4,199,113 1,406,457 3,197,496 989,987
At 1 January 3,294,693 3,193,929 3,055,566 2,599,705
Transfer from profit or loss account
Transfer to regulatory risk reserve - (7,024) - -
Transfer to fair value reserve - - 122,038 -
Dividend paid during the year - (1,014,672) (392,196)
(394,249)
At 31 December 3,294,693 5,360,428 3,197,496
4,199,113
Consolidation • Stability • Focus 129
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
33.1 Changes on initial application of IFRS 9 -- --
Reclassification of fair value on FVOCI debt -- --
instruments to amortised cost -- --
Reclassification of fair value on FVOCI -- --
equity instruments to FVTPL
Transfer of gain/(loss) from OCI to retained 13,486 6,462 --
earnings on disposal of FVOCI Instruments 7,024 7,024 --
--
34 Regulatory Risk Reserve - - --
At 1 January 20,510 13,486
Transfer from reserve
Transfer from reserve 901,768 (81,389) 765,772 (66,932)
At 31 December - - - -
- - -
35 Other Reserves (122,038)
At 1 January 901,768 (81,389) 643,734 (66,932)
Writeback of loss allowance
Transfer from retained earnings - - - -
Adjusted opening balance - 901,768 120,788 832,704
901,768 901,768 764,522 765,772
Arising during the period: -
Transfer of gain/(loss) from OCI to retained - - - -
earnings on disposal of FVOCI Instruments - - - -
(Note 29.1) - - - -
Fair valuation on items that will be - - -
subsequently reclassified to profit or loss
(Note 29.2)
At 31 December
Net fair value gain/(loss) on investments
in quoted equity instruments measured at
FVTOCI
Net fair value gain/(loss) on investments in
unquoted equity instruments measured at
FVTOCI
Transfer of gain/(loss) from OCI to retained
earnings on disposal of FVOCI Instruments
130 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
35.1 Fair valuation on items that may be -- - -
subsequently reclassified to profit or loss - 901,768 120,788 832,704
Net fair value gain(loss) on investments in
debt instruments measured at FVTOCI
Net fair value gain/(loss) on investments
in other financial instruments measured at
FVTOCI
- 901,768 120,788 832,704
36 Related parties
Parties are considered to be related if one party has the ability to control the other party or exercise influence over
the other party in making financial and operational decisions, or one other party controls both. The definition includes
subsidiaries, associates, joint ventures as well as key management personnel.
36.1 Identity of related parties Relationship %
VFD Bridge Limited Subsidiary 99
Everdon Bureau De Change Limited Subsidiary 99
VFD Microfinance Bank Limited Subsidiary 90
Anchoria Asset Management Limited Subsidiary 84
Kairos Capital Limited Subsidiary 55
Dynasty Real Estate Limited Subsidiary 58
Anchoria Investment Securities Limited Subsidiary 53
Atiat Insurance Brokers Subsidiary 67
Atiat Leasing Limited Subsidiary 42
VFD Tech Limited Subsidiary 100
36.2 Key management personnel
Key management personnel constitutes those individuals who have the authority and the responsibility for planning,
directing and controlling the activities of VFD Group Plc, directly or indirectly, including any director (whether executive or
non-executive). The individuals who comprise the key management personnel are the Board of Directors as well as certain
key management and officers.
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
=N=' 000 =N=' 000 =N=' 000 =N=' 000
36.3 Other information on key management
personnel
1,500 1,500 1,500 1,500
Emoluments: 171,718 171,718 65,395 65,395
Chairman 173,218 173,218 66,895 66,895
Other Directors
Consolidation • Stability • Focus 131
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Group Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
Fees =N=' 000 =N=' 000 =N=' 000 =N=' 000
Sitting allowance 20,850 20,850 8,500 8,500
Other emoluments 10,810 10,810 5,040 5,040
141,558 141,558 58,395 58,395
173,218 173,218 71,935 71,935
The total number of Directors were: 38 38 13 13
36.4 The number of persons employed 139 139 23 23
(excluding directors)in the company during
the year was as follows:
37 Principal subsidiaries
The financial statements of the Group include the operation of the following subsidiaries:
Company Place of Primary Business Operation % Held
Incorporation
VFD Bridge Limited Bridge Financing and Investment 99
Everdon Bureau De Nigeria Bureau De Change Business 99
Change Limited Nigeria
VFD Microfinance Bank Microfinance Banking services 90
Limited Nigeria
Anchoria Asset Investment and Fund Management 84
Management Limited Nigeria
Kairos Capital Limited issuing house and investment adviser 55
Dynasty Real Estate Nigeria Propecting and investing in Real 58
Limited Nigeria estate
Anchoria Investment Stock Brokerage Services 53
Securities Limited Nigeria
Atiat Insurance Brokers Insurance Brokerage Services 67
Atiat Leasing Limited Nigeria Auto and finance leasing 42
VFD Tech Limited Nigeria IT Infrastrcuture and Development 100
Nigeria
38 Events after reporting period
There are no material issues after the reporting period.
132 VFD Group plc 2021 Annual Report & Financials
STATEMENT OF VALUE ADDED
AS AT 31 DECEMBER 2021
2021 Group % 2021 Company %
=N=' 000 2020 2020
9,945,509 =N=' 000
% =N=' 000 5,240,186 % =N=' 000
(3,454,091) 4,411,832
Gross earnings
Operating expenses - Local 6,653,993
(1,175,747)
(1,277,416) (886,130)
6,491,418 100% 5,376,577 100% 4,064,439 100% 3,525,702 100%
Applied as follows: 1,963,760 30% 1,033,921 19% 640,514 16% 399,164 11%
To pay employees:
Salaries and other benefits
To pay Government: 414,554 6% 797,929 15% 180,750 4% 499,189 14%
Taxes
Retained for future replacement of assets and expansion of business:
- Deferred tax 114,815 2% (71,570) - - 0% (111,727)
4% 187,608 5% 139,371
- Depreciation 591,683 9% 191,564 1% 0% - 4%
62% - 75% 0%
- Impairment loss - 0% 75,439 3,055,566 2,599,706 74%
100% 100% 100%
- Profit for the year 3,406,607 52% 3,349,293 4,064,438 3,525,702
6,491,419 100% 5,376,577
Value added represents the additional wealth which the company has been able to create on its own and employees’ efforts. The
statement shows the allocation of that wealth between the employees, government and that retained by the company for the future
creation of more wealth.
Consolidation • Stability • Focus 133
FINANCIAL SUMMARY - COMPANY
AS AT 31 DECEMBER 2021
2021 2020 2019 2018 2017
=N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000
ASSETS 2,306,643 4,077,652 1,185,918 37,453 35,386
Cash and cash equivalents - - -
Funds under Management 3,328,484 3,843,252
Investment in financial assets 41,496,668 17,997,509 - - 1,096,538
Investment in joint venture - - 75,000
Investments in subsidiaries 1,514,125 549,523 131,233
Investment in associates 4,181,406 2,414,124
Property, plant and equipment 3,878,151 1,248,922 1,028,360 13,550
Intangible assets 340,368 1,424,005 49,817 33,702 633
Investment Property 98,670 - 41,500 -
Trade and other receivables 89,708
Special Placement with CBN 2,389,201 3,825,175 6,213,312 2,960,084 617,922
Deferred tax assets 7,005,362 4,060,099 10,000,000 -
TOTAL ASSETS 25,000,000 - 14,141
- - 1,984,403
LIABILITIES 95,944 95,944 23,540,578 8,493,874
Borrowings 58,993,178 -
Other liabilities 61,783,452 12,643,657 1,997,810 968,011
Current tax liabilities 6,019,867 5,006,917
Deferred tax liabilities 33,536,150 22,161,396 56,535 5,149
13,619,042 28,487,798 15,786 50,039 -
TOTAL LIABILITIES 17,762
527,869 499,038 18,735,845 973,160
EQUITY - - 7,072,528
Share capital 59,616 42,368
Share premium 47,683,062 51,148,232 3,822,062 42,368 984,027
Retained earnings 984,027 (89,328)
Other reserves 63,342 59,616 989,987 363,104
SHAREHOLDER'S FUND 7,912,098 3,822,062 (66,932) 74,176
5,360,428 3,197,496 4,804,733 31,847 1,011,243
TOTAL LIABILITIES AND EQUITY 1,421,346
CONTINGENT LIABILITIES 764,522 765,772 23,540,578 1,984,403
14,100,390 7,844,946 - 8,493,874 -
-
61,783,452 58,993,178
- -
134 VFD Group plc 2021 Annual Report & Financials
FINANCIAL SUMMARY - GROUP
AS AT 31 DECEMBER 2021
2021 2020 2019 2018 2017
=N=' 000 =N=' 000 =N=' 000 =N=' 000 =N=' 000
ASSETS 3,880,378 4,490,804 1,461,325 1,133,251 145,893
Cash and cash equivalents 15,170,586 12,792,413 18,668,089 5,990,507 -
Funds under management 63,552,349 25,899,754 6,305,682 5,924,201
Investment in financial assets 2,209,119
Investment in Joint ventures - - - - 65,372
Investment in associates 3,878,151 - - - -
Investment in property 4,570,436 6,080,258 - 1,841,500 -
Development Property - 137,365 - -
Property and equipment - 1,808,409 1,432,500 1,054,263 1,519
Intangible assets 1,079,896 113,007 63,852 46,169 23,536
Special Placement with CBN 25,000,000 10,000,000 - -
Trade and other receivables 612,822 5,373,563 6,131,815 3,058,271
Statutory deposits - - - - 645,891
Deferred tax assets 117,076 36,069 - -
TOTAL ASSETS 10,142,845 44,236,697 19,048,162
1,780 81,675,284 26,504
LIABILITIES 3,117,834
Bank Overdraft 244,521
Managed Funds
Borrowings 103,133,764
Other liabilities
Deposit liabilities - - 16,018,428 6,152,919 -
Current tax liabilities 26,062,482 25,248,777 15,743,876 4,233,010 990,120
Deferred tax liabilities 6,204,954 7,011,895 1,090,776
TOTAL LIABILITIES 8,379,397 7,366,177
25,884,681 29,068,808 - - -
EQUITY 25,820,007 287,337 99,522 10,662
Share capital 9,285,817 15,526
Share premium 817,421 812,396 38,254,595 -
Retained earnings - 12,630 17,512,872
Regulatory risk reserve 2,091,558
Other reserves 86,963,988 71,794,605
SHAREHOLDER'S FUND
Non-controlling Interest 63,342 59,616 59,616 42,368 42,368
TOTAL LIABILITIES AND EQUITY 7,912,098 3,822,062 3,822,062 984,027 984,027
CONTINGENT LIABILITIES 5,776,543 1,406,457 471,692 (78,987)
4,199,113
141,235 13,486 6,462 (37,267) 75,784
975,641 (81,389) 1,460,820 1,023,192
820,379
14,868,859 5,213,208 74,470 3,084
1,300,917 8,914,656 768,894 19,048,162 3,117,834
966,023
103,133,764 44,236,697 - -
- 81,675,284
-
-
Consolidation • Stability • Focus 135
136 VFD Group plc 2021 Annual Report & Financials
05
RISK
REVIEW
• BESPOKE ENTERPRISE RISK MANAGEMENT
• RISK MANAGEMENT FRAMEWORK
• RISK MANAGEMENT PHILOSOPHY, APPETITES AND OBJECTIVES
• CREDIT RISK MANAGEMENT
• LIQUIDITY RISK MANAGEMENT
• MARKET RISK MANAGEMENT
• OPERATIONAL RISK MANAGEMENT
• STRATEGIC RISK MANAGEMENT
• REPUTATIONAL RISK MANAGEMENT
INTRODUCTION
In 2021, the macro pressures from the covid
pandemic in 2020 slowly eased but the risks
still remain.
The economy benefited from government • Regulatory and financial reform
policy support, rising oil prices and will continue to impact operational
international financial assistance. Nigeria processing and is expected to
exited the recession in 2020 Q4. Headline play a key role in future trends
inflation rose sharply during the pandemic for providing transparency and
reaching 18.2 percent in March 2021 but mitigating risk.
declined to 15.6 percent in December.
• Technology continues to advance
Despite the recovery in oil prices, the general rapidly, enabling businesses to
government fiscal deficit is projected to widen execute many more transactions
in 2022 from fuel subsidies and higher security during periods of market volatility.
spending. Government revenue-to-GDP ratio
remains among the lowest in the world. • Businesses will continue to
develop new and more exotic
The macroeconomic headwinds continued types of transactions especially
to create multiplicity of known and unknown in FX derivatives and oil hedging
risks, forcing risk managers to delicately products.
navigate the risk minefields.
• New and more diverse types
It is important to acknowledge at the outset of clients continue to enter the
of this section that Risk management market, which require development
is constantly evolving. Regulations are of new operational procedures and
changing, technology continues to advance products.
and new exotic structures will continually be
introduced into the Nigerian financial market. All of these trends and many others will
Some of the major trends that will continue to continue to change the industry, eliminating
affect risk management are: some risks and introducing new ones. It is
imperative that we understand the operational
138 VFD Group plc 2021 Annual Report & Financials cycle and best practices surrounding
managing risks properly as the financial
market continues to evolve.
WE REMAIN For the Group, the outlook was viewed as an opportunity to optimize
VIGILANT our risk and governance processes and position the Group to benefit
WITH from market and regulatory developments. In summary, it has been a
REGARD very engaging year of risk management. Various risk management
TO BOTH
initiatives came to fruition during the period which deepened the
KNOWN AND range of risk management tools/processes that assisted the Group in
EMERGING managing risk over the period.
RISKS AND
ENSURE BESPOKE ENTERPRISE RISK MANAGEMENT
THAT WE
Helping our stakeholders achieve their ambitions lies at the heart of
ARE STRONG our processes as we apply bespoke risk management framework in
ENOUGH TO identifying, assessing, monitoring, controlling and reporting the inherent
WITHSTAND and residual risks associated with the pursuit of these ambitions and
ANY ensuring they are achieved the right way.
EXOGENOUS
SHOCKS As we deepen our presence in the market, proactive Enterprise Risk
Management Framework becomes even more critical.
The Group views and treats risks as an intrinsic part of business and
maintains a disciplined approach to its management of risk. The Risk
functions remain dynamic and responsive to the needs of stakeholders
as it improves its focus on the inter-relationships between risk types. It
uses periodic reviews of risk exposure limits and risk control to position
itself against adverse scenarios.
The Group’s risk management architecture, as designed, continued
to balance corporate oversight with well-defined risk management
functions which fall into one of three categories where risk must be
managed: lines of business, governance & control, and audit. The Board
of Directors and management of the Group are committed to constantly
establishing, implementing and sustaining tested practices in risk
management to match those of leading international organisations. We
are convinced that the long-term sustainability of our Group depends
critically on the proper governance and effective management of our
business. As such, risk management occupies a significant position of
relevance and importance in the Group.
Risk strategies and policies are set by the Board of Directors of the
Group. These policies, which define acceptable levels of risk for day-to-
day operations as well as the willingness of the Group to assume risk,
weighed against the expected rewards are detailed in the Enterprise
Consolidation • Stability • Focus 139
We seek to limit adverse variations in earnings
and capital by managing risk exposures within our
moderate risk appetite.
Risk Management (ERM) Framework, which from having enhanced its risk management
is a structured approach to identifying framework, which gives full coverage of a
opportunities, assessing the risk inherent in variety of risks.
these opportunities and actively managing
these risks in a cost-effective manner. Specific We have a holistic view of all major risks
policies are also in place for managing risks facing the Group. We remain vigilant with
in the different core risk areas of credit, regard to both known and emerging risks
market and operational risks as well as for and ensure that we are strong enough to
other key risks such as liquidity, strategic and withstand any exogenous shocks. Our Board-
reputational risks. level risk committees play a critical role in
providing oversight of risk management and
To some institutions, risk is viewed as a threat ensuring that our risk appetite and risk profile
or uncertainty, but to us, it goes beyond that. are consistent with and support our strategy
Risk to us, presents potential opportunities to deliver long-term, sustainable success in
to grow and develop our business within the achieving our strategic vision.
context of our clearly articulated and Board-
driven risk appetite. Risk, by definition, is dynamic in nature. The
management of risk, consequently, must
RISK MANAGEMENT be evolving, necessitating regular review
FRAMEWORK of the effectiveness of each enterprise risk
management component.
All activities and processes of the Group
involve the identification, measurement, We believe that understanding and managing
evaluation, acceptance and management our risks and continuously improving our
of risk or combinations of risks. The Board, controls are central to the delivery of
advised by the various Board and Management our strategic objectives. The Board’s risk
Risk Committees, requires and encourages a committees play an active role in ensuring
strong risk governance culture which shapes that we undertake well-measured, profitable
the Group’s attitude to risk. We believe that risk-taking activities that support long-term
risk management encompasses the insights sustainable growth.
delivered by information which facilitate
appropriate actions. VFD Group benefits
140 VFD Group plc 2021 Annual Report & Financials
RISK MANAGEMENT • Risk acceptance is done in a
PHILOSOPHY, APPETITE AND responsible manner;
OBJECTIVES
• The executive and the Board of
VFD Group’s Risk management philosophy the Group have adequate risk
and culture remain fundamental to the delivery management support;
of our strategic objectives. Risk management
is at the core of the operating structure of the • Uncertain outcomes are better
Group. We seek to limit adverse variations anticipated;
in earnings and capital by managing risk
exposures within our moderate risk appetite. • Accountability is strengthened; and
Our risk management approach includes • Stewardship is enhanced.
minimizing undue concentrations of exposure,
limiting potential losses from stress events RISK APPETITE
and the prudent management of liquidity.
Risk appetite is an articulation and allocation
Risk management is fundamental to the of the risk capacity or quantum of risk VFD
Group’s decision-making and management Group is willing to accept in pursuit of its
process. It is embedded in the role of all strategy, duly set and approved by the
employees via the organizational culture, thus executive committee and the Board, and
enhancing the quality of strategic, capital integrated into our strategy, business, risk and
allocation and day-to-day business decisions. capital plans.
The Group believes that enterprise risk The risk appetite metrics were tracked
management provides the superior capabilities against approved triggers and exceptions
to identify and assess the full spectrum of were reported to management for prompt
risks and to enable staff at all levels to better corrective actions. Key issues were also
understand and manage risks. This will ensure escalated to the Board Risk Management
that: Committee.
The goal of the Group is to apply sophisticated but
realistic credit models and systems to monitor and
manage credit risk.
Consolidation • Stability • Focus 141
RISK MANAGEMENT OBJECTIVES
The broad risk management objectives of the Group are:
• To identify and manage existing and new risks in a planned and coordinated manner
with minimum disruption and cost;
• To protect against unforeseen losses and ensure stability of earnings;
• To maximize earnings potential and opportunities;
• To maximize share price and stakeholder protection;
• To develop a risk culture that encourages all staff to identify risks and associated
opportunities and to respond to them with cost effective actions.
SCOPE OF RISKS
The scope of risks that are directly managed by the Group is as follows:
• Credit risk
• Operational risk
• Market and liquidity risk
• Legal and compliance risk
• Strategic risk
• Reputational risk
• Capital risk
These risks and the framework for their management are detailed in the enterprise risk management
framework.
The Group’s principal financial liabilities comprise borrowings and other liabilities. The main
purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal
financial assets include loans and receivables, other assets (excluding prepayments) and cash
and short-term deposits that derive directly from its operations. The Group also holds FVOCI
investment securities.
142 VFD Group plc 2021 Annual Report & Financials
The Board of Directors reviews and agrees policies for managing each of the financial risks, which
are summarised below.
1. Credit Risk Management
Credit risk arises from the failure of an obligor of the Group to repay principal or interest at
the stipulated time or failure otherwise to perform as agreed. This risk is compounded if the
assigned collateral only partly covers the claims made to the borrower, or if its valuation is
exposed to frequent changes due to changing market conditions (i.e. market risk).
The Group’s Risk Management philosophy is that moderate and guarded risk attitude will
ensure sustainable growth in shareholder value and reputation. Extension of credit in the
Group is guided by its Credit Policy Guide, which sets out specific rules for risk origination
and management of the loan portfolio. The Policy also sets out the roles and responsibilities
of different individuals and committees involved in the credit process.
The goal of the Group is to apply sophisticated but realistic credit models and systems
to monitor and manage credit risk. Ultimately these credit models and systems are the
foundation for the application of internal rating-based approach.
The pricing of each credit granted reflects the level of risks inherent in the credit. Subject
to competitive forces, The Group implements a consistent pricing model for loans to its
different target markets. The client’s interest is guarded at all times, and collateral quality
is never the sole reason for a positive credit decision.
The Group’s credit process requires rigorous proactive and periodic review of the quality
of the loan portfolio. This helps us to identify and remediate credit issues proactively.
The Board Credit Committee is responsible for oversight of the Group’s credit risk, including:
• Formulating credit policies in consultation with business units, covering
collateral requirements, credit assessment, risk grading and reporting,
documentary and legal procedures, and compliance with the Group credit
policies
• Reviewing and assessing credit risk. Assessing all credit exposures in excess
of designated limits, prior to facilities being committed to customers by the
business unit concerned. Renewals and reviews of facilities are subject to the
same review process.
• Developing and maintaining the Group’s risk grading in order to categorise
exposures according to the degree of risk of financial loss faced and to focus
management on the attendant risks.
• Providing advice, guidance and specialist skills to business units to promote
best practice throughout the Group in the management of credit risk.
Consolidation • Stability • Focus 143
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
An internal credit rating scale is in place to measure the counterparty risk. All customers that are
granted credit are evaluated using the Group’s risk rating model. The risk rating scale ranges from
A to D, where D represents very high risk and A represents low risk. The rating grid is shown below:
Above 50: Very High Risk (“D” client)
26 – 50: High Risk (“C” client)
15 – 25: Medium Risk (“B” client)
Less than 15: Low Risk (“A” client)
The Group establishes an allowance for impairment that represents its best estimate of incurred
loss in respect of loans and receivables.
The maximum exposure to credit risk (without taking into account any collateral held or other
credit support) at the reporting date is as follows:
GROUP CASH AND INVESTMENT LOANS AND HELD **OTHER TOTAL
CASH EQUIVALENTS SECURITIES RECEIVABLES/ FOR TRADING FINANCIAL
At 31 December 2019 =N=’ 000
Neither past due nor =N=’ 000 PLACEMENTS =N=’ 000 ASSETS
impaired 13,843,562
Impaired =N=’ 000 =N=’ 000 =N=’ 000 799,822
Gross amount
Impairment allowance 1,461,325 1,333,704 4,536,532 2,393 6,509,608 14,643,384
Carrying amount - - 403,538 - 396,284 (799,822)
At 31 December 2018 1,461,325 1,333,704 4,940,070 2,393 6,905,892 13,843,562
Neither past due nor - - (403,538) - (396,284)
impaired 10,048,912
Impaired 1,461,325 1,333,704 4,536,532 2,393 6,509,608 169,634
Gross amount
Impairment allowance 1,133,251 1,038,024 4,885,380 797 2,991,460 10,218,546
Carrying amount - - 169,634 - - (169,634)
10,048,912
COMPANY 1,133,251 1,038,024 5,055,014 797 2,991,460
- - (169,634) - - TOTAL
At 31 December 2019
Neither past due nor 1,133,251 1,038,024 4,885,380 797 2,991,460 =N=’ 000
impaired
Impaired CASH AND CASH INVESTMENT LOANS AND HELD **OTHER 10,685,124
Gross amount EQUIVALENTS SECURITIES RECEIVABLES/ FOR TRADING FINANCIAL 276,494
Impairment allowance
Carrying amount =N=’ 000 PLACEMENTS =N=’ 000 ASSETS 10,961,618
=N=’ 000 (276,494)
=N=’ 000 =N=’ 000 10,685,124
6,486,137
1,185,918 1,089,294 1,923,775 - 276,494
- - - - 6,762,631
-
1,185,918 1,089,294 1,923,775 - (276,494)
- - - 6,486,137
-
1,185,918 1,089,294 1,923,775
144 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
COMPANY CASH AND CASH INVESTMENT LOANS AND HELD **OTHER TOTAL
EQUIVALENTS SECURITIES RECEIVABLES/ FOR TRADING FINANCIAL
At 31 December 2018 =N=’ 000
Neither past due nor =N=’ 000 PLACEMENTS =N=’ 000 ASSETS
impaired =N=’ 000 6,785,368
Impaired =N=’ 000 =N=’ 000 -
Gross amount 2,904,573
Impairment allowance 37,543 709,560 3,133,692 - - 6,785,368
Carrying amount - - - - -
**includes mutual funds - 2,904,573
37,543 709, 560 3,133,692 - - 6,785,368
- - -
- 2,904,573
37,543 709, 560 3,133,692
2. Liquidity Risk Management:
Liquidity risk arises when the Group is unable to meet expected or unexpected current or
future cash flows and collateral needs without affecting its daily operations or its financial
condition. The Group is managed to preserve a high degree of liquidity so that it can meet
the requirements of its customers at all times including periods of financial stress.
We analyze and monitor our liquidity risk, maintain excess liquidity and access diverse
funding sources.
Quantifications
VFD Group has adopted both qualitative and quantitative approaches to measuring
liquidity risk. Specifically, the Group adopted the following approaches;
• Funding and Liquidity plan;
• Gap Analysis; and
• Ratio Analysis.
The Funding and Liquidity plan defines the Group’s sources and channels of utilization
of funds. The funding liquidity risk limit is quantified by calculating liquidity ratios and
measuring/monitoring the cumulative gap between our assets and liabilities. The Liquidity
Gap Analysis quantifies the daily and cumulative gap in a business-as-usual environment.
The gap for any given tenor bucket represents the borrowings from, or placements to, the
market required to replace maturing liabilities or assets. The Group monitors the cumulative
gap as a + or – 20% of the total risk assets and the gap as a + or – 20% of total deposit
liabilities.
Consolidation • Stability • Focus 145
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
Limit management and monitoring
Active management of liquidity through the framework of limits and control presented
above is possible only with proper monitoring capabilities. The monitoring process focuses
on funding portfolios, the forward balance sheet and general indicators; where relevant
information and data are compared against limits that have been established. The Group’s
Treasury is responsible for maintaining sufficient liquidity by maintaining sufficient high
ratio of liquid assets and available funding for near-term liabilities. The secured liquidity
measure is calculated and monitored by risk management. Liquidity risk is reported to the
Board of Directors on a quarterly basis.
Liquidity risk is strongly related to other financial risks such as credit risk and market risks,
such as interest rate risk, security price risk, etc.
Contingency funding plan
The Group has a contingency funding plan which incorporates early warning indicators
to monitor market conditions. The Group monitors its liquidity position and funding
strategies on an ongoing basis, but recognizes that unexpected events, economic or
market conditions, earnings problems or situations beyond its control could cause either
a short or long-term liquidity crisis. It reviews its contingency funding plan in the light of
evolving market conditions and stress test results.
To monitor liquidity and funding, the Group Treasury prepares a liquidity worksheet that
project sources and uses of funds. The worksheet incorporates the impact of moderate risk
and crisis situations. The worksheet is an integral component of the contingency funding
plan. Although it is unlikely that a funding crisis of any significant degree could materialize,
we consider it important to evaluate this risk and formulate contingency plans should one
occur.
The contingency funding plan covers: the available sources of contingent funding to
supplement cash flow shortages; the lead times to obtain such funding; the roles and
responsibilities of those involved in the contingency plans; and the communication
and escalation requirements when early warning indicators signal deteriorating market
conditions. Both short term and long-term funding crises are addressed in the contingency
funding plan.
The tables below represent the maturity profile of the carrying amounts of the non-
derivative financial assets and financial liabilities within the Group.
146 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
GROUP CARRYING CONTRACTUAL 0-90 DAYS 91-180 181-365 ABOVE 365
AMOUNT CASH FLOWS =N=’ 000 DAYS DAYS DAYS
At 31 December 2019
=N=’ 000 =N=’ 000 =N=’ 000 =N=’ 000 =N=’ 000
Financial liabilities
15,743,876 15,743,876 4,199,793 401,962 6,038,313 5,103,808
Borrowings
Other financial liabilities 2,502,232 2,502,232 2,281,096 181,034 8,380 31,722
(excluding deposit for 18,246,108 18,246,108 6,480,889 582,996 6,046,693 5,135,530
shares)
Carrying amount 1,461,325 1,461,325 1,461,325 - - -
2,393 2,393 2,393 - -
Financial assets - - 1,460,689 1,333,704
Cash and cash 1,333,704 1,333,704 256,662 - 266,176
equivalents 4,475,486 4,879,024 2,895,497 - -
Held for trading 61,046 1,126,083 697,564 50,000
Investment securities 61,046 61,046 1,382,745 2,158,253 1,649,880
Loans and receivables 6,509,608 6,905,892 5,032,245
Fixed debt placement (799,749) 3,888,440 3,485,650
Other financial assets ** 13,843,562 14,643,384 9,452,506
91-180 181-365 ABOVE 365
Net liquidity (surplus)/ 4,402,546 3,602,724 (2,971,617) DAYS DAYS DAYS
deficit
CARRYING CONTRACTUAL 0-90 DAYS =N=’ 000 =N=’ 000 =N=’ 000
GROUP AMOUNT CASH FLOWS =N=’ 000
116,206 49,811 -
31 December 2018 =N=’ 000 =N=’ 000
Financial liabilities:
Borrowings 4,233,010 4,233,010 4,066,993
Other financial
liabilities (excluding 3,256,507 3,256,507 2,230,735 679,761 346,011 -
deposit for shares) 7,489,517 7,489,517 6,297,728 795,967 395,822 -
Cash and cash 1,133,251 1,133,251 1,133,251 - - -
equivalents 1,038,024 1,038,024 841,100 - - 196,924
Investment securities 2,542,776 2,712,410 841,309 436,658 718,192 716,251
Loans and receivables 2,342,604 2,342,604 2,336,729 - -
Fixed debt placement - - 5,875
Held for trading 797 797 797 968,710 173,758 -
Other financial assets 2,037,460 2,037,460 797,264 1,405,368 891,950
97,728
Net liquidity (surplus)/ 9,094,912 9,264,546 5,950,450 (609,401) (496,128) (1,016,778)
deficit
(1,605,395) (1,775,029) 347,278 (1,016,778)
Consolidation • Stability • Focus 147
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
COMPANY CARRYING CONTRACTUAL 0-90 DAYS 91-180 181-365 ABOVE 365
AMOUNT CASH FLOWS =N=’ 000 DAYS DAYS DAYS
At 31 December 2019
Financial liabilities =N=’ 000 =N=’ 000 =N=’ 000 =N=’ 000 =N=’ 000
Borrowings
Other financial liabilities 12,643,657 12,643,657 1,860,069 - 5,679,780 5,103,808
(excluding deposit for
shares) 2,546,635 2,546,635 2,546,635 -- -
15,190,292 15,190,292 4,406,704 - 5,679,780 5,103,808
Financial assets
Cash and cash equivalents 1,185,918 1,185,918 1,185,918 - - -
Investment securities 1,089,294 1,089,294 - - - 1,089,294
Fixed placements 1,203,873 1,203,873 - -
Loans and receivables 1,203,873 - - -
Other financial assets** 719,902 719,902 719,902 839,236 658,023 -
6,170,722 6,447,216 839,236 658,023 -
Net liquidity (surplus) / 4,949,957 1,089,294
deficit 10,369,709 10,646,203 (839,236) 5,021,757
8,059,650 4,014,514
4,820,583 4,544,089 (3,652,946)
GROUP CARRYING CONTRACTUAL 0-90 DAYS 91-180 181-365
AMOUNT CASH FLOWS =N=’ 000 DAYS DAYS
At 31 December 2019
=N=’ 000 =N=’ 000 1,993,825 =N=’ 000 =N=’ 000
Financial liabilities
Borrowings 1,997,810 1,997,810 545,545 3,985 -
Other financial liabilities 2,539,370
(excluding deposit for 1,321,995 1,321,995 776,450 -
shares) 3,319,805 3,319,805 780,435 -
Financial assets 37,453 37,453 37,453 - -
Cash and cash equivalents 709,560 709,560 112,093 - 597,467
Investment securities 3,070,317 3,070,317 3,070,317 -
Fixed Placement 2,250 -
Loans and receivables 63,375 63,375 2,250 108,000 58,875
Other financial assets 1,950,573 1,950,573 1,842,573 110,250
5,831,278 5,831,278 5,064,726 -
Net liquidity (surplus)/ 670,185 656,342
deficit (2,511,473) (2,511,473) (2,525,316)
(656,342)
148 VFD Group plc 2021 Annual Report & Financials
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
3. Market Risk Management well as legal limitations on individual
positions imposed by the regulatory
Definition authorities in Nigeria.
VFD Group is faced with the risk of Depending on the market conditions
decline in its earnings and capital and risk outlook, recommendations
arising from adverse changes in market are made to the risk management
variables, such as interest rate and committees in respect of the market
foreign exchange rate. Market Risk is risk profile, risk appetite appraisal, as
the risk that the value positions will be well as review of limits against actual
adversely affected by movements in position.
equity prices, interest rates, currency
exchange rates and commodity prices. The Group regularly conducts stress
testing to monitor its vulnerability to
Market Risk Management: unfavorable shocks. It monitors and
Policy and control controls its risk, using various internal
and regulatory risk limits.
Over the years, the Nigerian financial
market has witnessed a dramatic Interest rate risk
expansion in the array of financial
services and products. This tremendous Interest rate risk is the exposure of the
growth in scale and scope has also Group’s financial condition to adverse
generated new risks with global movements in interest rates, yield
consequences, especially market curves and credit spreads.
risk, necessitating an assessment
of exposures to the volatility of the The Group’s exposure to interest rate
underlying risk drivers. risk is minimal as it does not invest in
floating rate securities and its fixed rate
These developments have prompted placements are with banks and other
a comprehensive and dynamic Market financial institutions.
Risk Policy, to ensure that risks faced
across business activities and on Re-pricing and Liquidity Gap
an aggregate basis are within the Analysis
stipulated risk appetite of the Group.
These policies have been benchmarked The Group’s objective for management
with industry and international best of interest rate risk to ensure a higher
practices. degree of interest rate mismatch margin
stability and lower interest rate risk over
The Board approves the risk appetite an interest rate cycle.
and risk limits are set within the context
of the approved market risk appetite. The Group’s operations are subject to
Limits are set based on the approved the risk of interest rate fluctuations to
risk appetite, underlying liquidity as the extent that interest-earning assets
Consolidation • Stability • Focus 149
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2021
and interest-bearing liabilities mature or any further loss based on existing
re-price at different times or in differing exposures. Positions are liquidated
amounts. In the case of floating rated uniformly when stop loss limits are
assets and liabilities. breached.
Sensitivity Analysis Dealer Limits: This limit sets a maximum
tolerable position exposure for a specific
Interest-rate risk is monitored with a Gap dealer.
report. A limits framework is in place to
ensure that retained risk remains within Mark-to-Market (MTM)
approved appetite.
The marking-to-market technique
Sensitivity Analysis and Stress establishes historical profit/loss by
Testing revaluing money market exposures to
prevailing market prices.
Sensitivity analysis and stress testing
are risk measurement techniques that Stress testing
help us ensure that the risks the Group
takes remain within our risk appetite The stress testing methodology
and that our level of capital remains assumes that scope for management
adequate. Sensitivity analysis involves action would be limited during a stress
varying a single factor (e.g. a model event, reflecting the decrease in market
input or specific assumption) to assess liquidity that often occurs.
the impact on various risk measures.
Stress testing is an integral part of the
Stress testing generally involves market risk management framework and
consideration of the simultaneous considers both historical market events
movements in a number of risk factors. It and forward-looking scenarios. Stress
is used to measure the level of potential testing provides an indication of the
unexpected losses for Credit, Market, potential size of losses that could arise
Operational and Liquidity Risks. in extreme conditions. It helps to identify
risk concentrations across business lines
Limits and assist senior management in capital
planning decisions.
Specific limits and triggers (regulatory
and in-house) have been set across the Stress scenarios are regularly updated
various market risk areas to prevent to reflect changes in risk profile and
undue exposure and the market risk economic events. Regular stress
management exist; test scenarios are applied to interest
rates, credit spreads and exchange
Stop Loss Limit: This limit sets a rates Financial instruments affected
maximum tolerable unrealized profit/ by market risk include borrowings,
loss to date which will trigger the deposits and FVOCI investments.
closing of a position in order to avoid
150 VFD Group plc 2021 Annual Report & Financials
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