Nigeria Content Online

Splitting the atom
was a major technological feat for humankind. Releasing energy from it
for electricity production was yet another major step towards
supporting the unfolding path of civilisation.

The worst memories
of the deliberate unleashing of the power of a nuclear device remain
the exploding of atomic bombs over Japanese towns of Hiroshima and
Nagasaki in 1945, towards the end of the Second World War.

In terms of nuclear
accidents of monumental disaster, the 1986 Chernobyl disaster in
Ukraine (then in the former Soviet Union) has no match. Many deaths and
severe health problems followed this accident. The radioactivity that
accompanied the Chernobyl accident was several times higher than what
was unleashed by the atomic bombs dropped on Japan during the Second
World War.

The radiation
spread as far as Belarus, Russia, Ukraine, and parts of France and
Italy. The Chernobyl accident was adjudged to have resulted from human
error, including design defects. It was also accompanied by a series of
attempts to cover up the impacts, as well as a shrouding of the
exploded reactors in defective concrete.

Today, the world is
alarmed by the massive impacts of the 8.9 or 9.0 magnitude earthquake
that struck off the coast of Honshu Island in Japan. The combined
effect of the earthquake and the ensuing tsunami has astonished a
watching world, brought great misery to the people of Japan, and raised
a huge question mark about how prepared we can ever be for natural
disasters.

Everyone accepts
that Japan is well equipped and prepared to handle earthquakes, with
building codes and other emergency infrastructure set to deal with such
happenstance. What has added a new twist to the current situation is
the impact that the earthquake and tsunami has had on Japan’s nuclear
power plants.

An explosion at the
Daiichi plant near Fukushima on March 12 raised anxieties. The
explosion blew off the upper exterior walls of the plant. The standby
diesel generator that would have pumped water to cool the plant failed
one hour after the earthquake struck, leading to the overheating of the
water and resulting in the explosion.

The authorities
announced that the reactor core of the plant was safe, and that there
wasn’t a huge radiation leak. Nevertheless, over 100, 000 people had to
be moved, owing to fears of radiation impacts. The evacuation zone
stretched over 20 kilometres radius of the plant. Over the next few
days, the radiation kept below acceptable official levels, although
anxiety levels remained high.

A more severe
explosion early on March 15 raised radiation levels, increasing fears
that the containment vessel of reactor 2 had been damaged. The
evacuation of emergency workers from the power plant signified the
possibility of a nuclear catastrophe.

The nuclear game is
getting a link to soccer in Brazil where there are plans to bring a new
nuclear power plant on stream, early enough to provide electricity for
the 2014 FIFA World Cup fiesta the country would then be hosting. The
country already runs two nuclear power plants that came into use in
1985 and 2000, meeting 50 per cent of the electricity needs of the
state of Rio de Janeiro. Environmental concerns are being addressed
through pledges to adhere to rules. But pledges are not so reassuring
in these matters.

Closer home in
Africa, the drive towards nuclear power is gathering momentum. South
Africa already invests huge sums in this mode of energy generation and
produces 5 per cent of its electricity from nuclear plants. Uranium
rich countries such as Namibia believe that this is a way to boost
economic development. There have even been talks of the possibility of
building floating nuclear plants off the coast of Namibia.

Although Namibia is
not earthquake prone, this does not sound like an exciting or safe way
to go. Apart from the risks involved in operating nuclear power plants,
it is not quite clear to whom the country plans to export the surplus
electricity that would be generated by this plant. One could venture to
say that floating nuclear plants would be dynamic power generators and
may be moved closer to export markets, possibly as far away as energy
starved Nigeria.

The incident from
Japan also underscores the need to move away from mega power
infrastructures that depend on extensive distribution grids. It
suggests that nations should invest in the development of renewable
energy sources from abundant solar, wind, and other resources, rather
than embark on high-risk technologies that we cannot quite control.

It is also a time
to realise the viability of localised energy provision on the basis of
energy autonomy for discrete zones and communities. This would be
cheaper to deliver and ensures better energy supply, including during
crisis situations.

Considering
Nigeria’s emergency response preparedness and capacities in simple
areas like fires, oil spills, and industrial accidents, as well as the
quality of maintenance of our hydropower and other plants, venturing
into the nuclear power arena here is nothing short of courting
disaster.

Demand
for foreign exchange is gradually edging up, as the Central Bank of
Nigeria (CBN) offered $1.3 billion so far this month at the official
Wholesale Dutch Auction System (WDAS) window.

Even
though there are five more auctions for the month of March, the amount
so far traded exceeds the average traded figure since the beginning of
the year.

A
total of $2.25 billion was traded in January while $1.7 billion was
traded in February. In January, an average of $281 million was traded
per session while $242 million was traded in February. For March, an
average of $325 million has been the figure so far, even though it is
still the middle of the month. This represents an increase of over 34
per cent from the previous month.

Upsurge

The
upsurge in foreign exchange demand comes amidst mixed expectations from
operators on the direction of the market this week. Analysts at FSDH
Securities Limited, a financial advisory and investment firm, stated
that there would not be much pressure on that window of the financial
market.

“We
are of the opinion that the current fiscal position of the Federal
Government should not exert excessive demand pressure on the foreign
exchange. Thus, we expect the foreign exchange rate to remain stable in
the short to medium term,” the firm stated in its report for last week.

However,
the naira has continued to face undue pressure due to market forces.
While the national currency closed last week at N150.79 to the dollar,
it declined to N150.90 at Monday’s trading, a drop of 0.07 per cent.
The naira sold N155.50 at the parallel market, a decline of 0.71 per
cent from the previous trading.

This
development, according to Afrinvest, a Lagos-based financial services
firm, is due to the sustained level of demand for the dollar and
reduced inflows from oil majors.

“We
expect further downward pressure on the naira this week as we do not
foresee any significant increase in supply by the CBN,” the firm
reported.

Speculative activities

Currency dealers, however, blame the activities of speculators for the current dip in the value of the naira.

According
to Suleman Gali, a bureau de change operator in Marina, even the banks
are increasing their rates due to the pressure to sell to currency
speculators.

“We
were selling at N157 to the dollar only for my bank to send me a mail
this morning (yesterday) increasing their selling price to N157.50.
Automatically, we also had to increase,” Mr. Gali said.

He
said the Central Bank would need to monitor the banks to ensure that
they respect the two per cent band, which is the official rate approved
by the regulator between buying and selling.

“Since
last week, the banks have been increasing their rate. So, instead of
selling direct to us, they prefer to sell internally to people who are
ready to pay more,” he added.

Attractive entry point

Samir
Gadio, Emerging Markets Strategist, Standard Bank, said the current
weakness of the naira represents an attractive entry point for
investors ready to position for a post-electoral rally in the foreign
exchange market in April 2011.

“Dollar
to naira has traded above the +3 per cent upper end of the Central Bank
exchange rate objective (156.2 on 15 March), probably driven by the
usual uncertainty associated with any electoral cycle in African
countries and rising corporate and speculative demand at the WDAS
window, as well as in the inter-bank market.

“We also think the forthcoming initiation of a forward market for
30-, 60- and 90-day tenors by the Central Bank should further support
naira by smoothing foreign exchange demand and volatility,” Mr. Gadio
said.

FirstRand, South
Africa’s No. 2 banking group, is in advanced talks with Nigeria’s
Sterling Bank over making a strategic investment in the lender, banking
sources familiar with the deal said.

Managing director,
Sizwe Nxasana, who took over the reins of FirstRand over a year ago,
told Reuters last year the South African bank was looking to invest
“meaningful amounts of capital” in Nigeria and would fund any deal from
its reserves.

It was the first
foreign bank to announce its interest in buying one out of the nine
Nigerian banks rescued by Central Bank in a $4 billion bailout in 2009
but later got cold feet.

Banking sources
said FirstRand prefer to enter the Nigerian market through a strategic
alliance with a healthy local bank and would be looking to deploy
around $300-$400 million to fund such an investment.

Sterling Bank, not
one of the bailed-out banks, has a market valuation of around 33.7
billion naira ($225 million) as at March 10. FirstRand and Sterling
Bank both declined to comment.

“They (FirstRand) are looking at making a strategic investment in Sterling,” one banking source told Reuters.

Apart from FirstRand, other deals are looming in
Nigeria’s banking sector as new investors seek to recapitalise the
rescued banks and a state-run “bad bank”. AMCON has set a June
timeframe to resolve the country’s banking crisis.

Banking sources
said a consortium involving Vine Capital, a relatively unknown private
equity firm, has put in a bid to acquire Finbank after the lender
dismissed an earlier bid by local rival, First City Monument Bank
(FCMB).

“Finbank rejected FCMB’s bid and asked Vine Capital to make a bid,” another source told Reuters, declining to be named.

Banking sources
said Vine Capital has signed a recapitalisation agreement with Afribank
and intends to bid for Finbank in order to merge it with Afribank.

Central Bank
governor, Lamido Sanusi, said last week two of the rescued banks have
signed Memoranda of Understanding (MoU) with new investors and two more
should sign this week or next.

Mr. Sanusi said he expected the deals to be completed within 8 to 12 weeks of the agreements being signed.

“The MoU more or
less captures negotiations that have been completed. What is left is
basically … implementation of the terms, obtaining the necessary
shareholder and regulatory approvals,” Mr. Sanusi told Reuters in an
interview in his office.

Reuters

Nigeria’s inflation
rate stood at 11.1 per cent year-on-year in February 2011. This is
lower than 12.1 per cent recorded in the previous month in the new
Composite Consumer Price Index (CPI) series released by the nation’s
bureau of statistics. The monthly change of the CPI was 0.96 per cent
improvement when compared with January 2011.

The percentage
change in the average composite CPI for the twelve-month period ending
February 2011, over the average of the CPI for the previous
twelve-month period was 13.2, slightly lower than the figure for the
preceding month.

Average monthly
food prices rose by 2.9 per cent in February 2011 when compared with
January 2011 figure. The bureau says the increase in the month-on-month
index was caused mainly by upward movement of the prices of some food
items like yam, beverages, fruits, vegetables, fish, and cereals.

The ‘All items less
Farm Produce’ index, which excludes the prices of agricultural
products, increased by 0.9 per cent in February 2011 when compared with
January 2011. The increase was mainly on some household items, building
materials, diesel, and kerosene.

In the twelve-month
to January 2011, the index rose by 10.6 per cent while the average
annual rate of rise of the index was 12.1 percent for the twelve-month
period ending February 2011.

Bismarck Rewane,
managing director, Financial Derivatives Company, said a relatively
stable exchange rate and the fact that the dollar appreciated against
other currencies are some of the reasons behind the drop.

“Nigeria’s
inflation rate has fallen. This could be a reflection of the relatively
stable foreign exchange rate over the months. The prices of imported
goods may not have influenced the market as they used to because of the
stable rate.

“However, this
doesn’t mean that prices of goods have gone down; it doesn’t mean that
general prices have actually reduced. This means that the rate at which
prices increase have reduced,” Mr. Rewane said.

“This is happening probably because the Central Bank is holding the forex rate stable, within a specific range,” he added.

Samir Gadio,
Emerging Markets Strategist, Standard Bank, says given the surge in oil
price and the turnaround in oil output, the Central Bank is keen to
support exchange rate stability.

“Oil production and
price dynamics, coupled with incrementally tangible signs of some
fiscal restraint in 2011, as government borrowing declined sharply in
recent months, should ultimately support the Central Bank’s willingness
and ability to maintain the exchange rate within the +/-3 per cent
range around the 150 dollar to naira level.

“Furthermore, the
Central Bank’s governor, Lamido Sanusi, reiterated several times in
recent weeks that any currency devaluation would have a negative effect
on inflation and other macroeconomic control variables, but would not
necessarily result in improved external competitiveness, due to the
structural and infrastructure bottlenecks of the economy and its
import-dependent nature,” Mr. Gadio said.

Experts say the
monetary tightening by the Central Bank since September 2010 has helped
curtail naira liquidity and contain speculative demand for the dollar.

The Monetary Policy
Rate was gradually rose by 50 basis points to 6.5 per cent between the
September and January Monetary Policy Committee (MPC) meetings, and the
Standing Deposit Facility rate was raised 350 basis points to 4.5 per
cent in the same period.

Outlook

The chances of the
Central Bank increasing rates further at the next Monetary Policy
Committee meeting to be held later in the month are reasonably high,
according to forecasts by industry watchers.

“The exchange rate
has come under pressure again and the risks to inflation remain to the
upside, despite the drop in consumer prices to 11.1 per cent year on
year in February, from 12.1per cent in January,” Mr. Gadio said.

The Nigerian Stock
Exchange recorded a total loss of N260 billion on equities at the close
of trading activities in February, after recording significant gains of
N662 billion in the preceding month.

The market value of
the 217 listed equities, which opened the month at N8.575 trillion,
closed on the last trading day in February at N8.315 trillion,
reflecting a N260 billion loss or 3.03 per cent decline.

The 217 listed
equities accounted for 80.74 per cent of total market capitalisation of
the 263 listed securities, which closed February at N10.298 trillion;
down by 2.7 per cent from the N10.583 trillion in January.

The Exchange’s
strategy and business development department said the downturn in stock
market activities, which started in late-January and continued during
February, “severely constrained growth” of the Nigerian capital market.

“The stock market
continued to suffer from low liquidity arising from low incomes and
reduced savings, mixed performance by quoted companies, and profit
taking/loss cutting,” the NSE said, adding that “the scenario continued
to dampen investors’ confidence.”

Low turnover

The market recorded
a turnover of 6.5 billion shares valued at N60.61 billion in 119,477
deals during February, in contrast to a total of 10.84 billion shares
valued at N104.1 billion exchanged during January in 139,950 deals.
Trading days last month were 19 compared with the 20 days in January.

Aggregate stock
market turnover between January and February were 17.334 billion shares
valued at N164.7 billion exchanged in 259,427 deals.

In the comparable
period during 2010, the market recorded turnover of 16.14 billion
shares valued at N100.8 billion in 429,306 deals.

Measuring by
turnover volume, the Banking subsector was the most active in February
with traded volume of 4.5 billion shares valued at N37.3 billion, while
the Insurance subsector was second with traded volume of 450.23 million
shares valued at N666.9 million. The Maritime subsector was third with
transaction volume of 218.41 million valued at N390.56 million.

Aanalysts at
Financial Derivatives Company Limited, a business consultancy firm,
said as trading proceed in the year, market drivers would be “the
progress of the Asset Management Corporation of Nigeria,” activities of
“investors taking position in anticipation of favourable year end
results” of some quoted companies, and “expansion of operations by
listed foreign multinationals.”

Bond trading

Over-The-Counter
(OTC) bond market, a turnover of 926.1 million units worth N841.05
billion was recorded in February 2011, in contrast to a total of 875.62
million shares valued at N801.134 billion exchanged during the
preceding month.

The most active
bond, in terms of volume, was the 10.00 per cent Federal Government of
Nigeria (FGN) Bond July 2030, with a traded volume of 218.6 million
units valued at N170.2 billion. It was followed by 5.50 per cent FGN
Feb 2013, with traded volume of 206.9 million units valued at N194.2
billion.

Only 24 of the available 33 FGN Bonds were traded during the month, same as in the preceding month.

As in the preceding
month, the most active bond, in terms of volume, was the 10.00 per cent
Federal Government of Nigeria (FGN) Bond July 2030 with a traded volume
of 269.4 million units valued at N214.54 billion.

It was followed by
5.50 per cent FGN Feb 2013 with traded volume of 199.85 million units
valued at N191.4 billion. Only 21 of the available 32 FGN Bonds were
traded during the month, compared with the 24 in the preceding month.

An explosion was
heard at a Nigerian onshore oil flow station operated by Agip in the
Niger Delta on Wednesday, security sources said, but the cause was not
immediately clear.

A joint military
task force confirmed there had been an explosion in Bayelsa State in
the Niger Delta, but did not specify the exact location. Italian oil
firm, Agip, was not immediately available for comments.

The explosion was heard in the early hours at Agip’s Clough Creek oil flowstation in Bayelsa, one security source said.