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The
Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) yesterday
raised its policy rate by 25 basis points from 6.25 per cent to 6.5per
cent with immediate effect.

It
also said that inflation risk as a major concern cannot be ignored in
the short-to-medium-term, particularly against prospects of increased
liquidity as a result of the likely increase in government spending in
the run up to the April elections, as well as purchase by the Asset
Management Company of Nigeria (AMCON). The MPC described as
unsustainable the existing subsidy regime on petroleum products in view
of government’s current poor finance.

Sanusi
Lamido Sanusi, the CBN governor, in a communiqué at the end of a
two-day meeting in Abuja, said the decision by the 12-member committee
received a majority vote of 11 to one, as a demonstration of its
commitment to maintain price stability by pursuing a tight monetary
policy in the face of perceived inflation risks in the near future.

At
its previous meeting held November last year, the committee resolved to
retain the rate at 6.25 per cent fixed during its earlier meeting,
underscoring the need to retain flexibility and allow the effect of the
previous rate increase from 6 per cent to work through the system.

Similarly,
the committee resolved to raise the Cash Reserve Requirement (CRR)
ratio by 100 basis points from one per cent to two per cent with effect
from February 1, while the Liquidity Ratio (LR) would be raised by 500
basis points from 25 per cent to 30 per cent with effect from March 1.

Though
the CBN governor noted the economy growth and the continual recovery of
the capital market, and the progress towards restoring stability in the
banking sector, he reiterated the need for government to further
strengthen and deepen economic and structural reforms to redress the
challenge of continued high inflation.

‘Restrain’ is the word

Mr.
Sanusi regrets that despite improved supply of petroleum products and
lower growth in monetary aggregates, the downward trend towards a
single digit benchmark inflation level was not achieved in 2010,
pointing out that this underscores the need to address both
supply/demand side factors that determine the country’s inflation
dynamics.

“One
of the ways to keep aggregate demand in check is to restrain
debt-financed government spending in the medium-term. This calls for a
review of subsidies and other recurrent expenditure categories that
constitute a drain on the national budget as well as improving the
revenue base,” he said.

Though
the committee commended the government for its emphasis on capital
expenditure and infrastructure development in this year’s budget, it
observed that allowing recurrent expenditure at over 70 per cent of the
total budget remained high, pointing out that the risk posed to price
stability by fiscal operations must be constantly monitored to bring
inflation down to single digit levels in the short to medium term.

Rather
than continue to spend huge foreign exchange on petroleum subsidies as
well as importation of food items such as rice, the committee
emphasised the need for government to implement policies that will lead
to food security and total self sufficiency.

“Implementation of these reforms along with the improved outlook for
oil price and output should go a long way in reversing the negative
trend in our foreign reserves, which stood at $32.32 billion as at
end-December 2010, before rising to $33.26 billion as at 20January 20,”
the committee further said.

Algeria expects oil
production to remain steady in 2011, while Liquefied Natural Gas (LNG)
supply contracts will be met despite reduced capacity, the head of
state-owned energy giant, Sonatrach, said on Tuesday.

“We will stick to
oil production which will be practically the same as in 2009 and 2010,”
Sonatrach chief executive, Nourredine Cherouati, told a news conference.

The North African
OPEC member supplies about 20 per cent of Europe’s natural gas and is
the world’s eighth-biggest exporter of crude oil, pumping 1.25-1.27
million barrels per day in November and December, according to a
Reuters poll.

Despite an
“incident” at one LNG plant which cut capacity in late 2010, Algeria
still produced 31 billion cubic metres of super-cooled gas last year,
Sonatrach said, and has enough capacity to meet all its supply
contracts.

“We have the capacity to meet the demand on the market,” Mr. Cherouati told reporters when asked about the incident last year.

“We have sufficient
capacity in relation to our contractual obligations so we have taken
the decision to stop the first liquefaction plant that we have,” he
added.

Camel close down

The plant in the
port of Arzew, officially called GL4Z but commonly known as Camel, is
the oldest LNG export facility in the world and is too inefficient to
be profitable in the current market, he said. Sontrach has three LNG
plants at Arzew and one at Skikda.

Mr. Cherouati said he expected the much-delayed Medgaz gas pipeline to Spain to be operational by mid-February.

Algeria has been
sending a lot of its LNG to Europe over the last few years after buyers
in the United States lost interest in imported gas because of booming
North American shale gas production.

Although rising
demand in China, the Middle East and South America have helped support
LNG sales, gas prices in most markets, particularly the United States,
are still well below levels seen before the global financial crisis
slashed industrial energy demand in early 2008.

Increased capacity
in Qatar, the world’s largest LNG exporter, and plentiful alternative
gas production in North America, have put further pressure on gas
prices.

But prices are widely expected to rise over the next decade as higher demand, especially in Asia, slowly absorbs the glut.

Mr. Cherouati said
Sonatrach had not decided whether to buy assets in Algeria, which
Britain’s BP has put up for sale to help pay for the Gulf of Mexico oil
spill in early 2010.

Russian oil
company, TNK-BP, has said it is interested in BP’s Algerian assets,
which include stakes in two major gas-producing fields, but Sonatrach
has the right of first refusal.

Sonatrach, which
some analysts say has under-invested in new oil and gas projects, has
set a target of doubling the number of exploration wells, Mr.Cherouati
said. He did not say how the increase would be achieved or give a
timetable.

Asked if there were
any plans to speed up exploration by making the terms on offer for
foreign investors more attractive, he said: “That is a question that
you have to ask the state… The state is my employer.”

Reuters

The market
capitalisation of equities at the Nigerian Stock Exchange (NSE), on
Tuesday, hit N8.884 trillion as transactions closed on a positive note.

Subsequently, it
rose by 0.10 per cent or N9 billion at the close of yesterday’s trading
from Monday’s figures of N8.875 trillion. The market had gained N27
billion at the close of trading session on Monday. The last time the
Exchange recorded market capitalisation in N8.88 trillion regions was
over two years ago.

The NSE sectoral
indices closed with mixed sentiments as NSE-30, which measures the
performance of blue chips in the market, dropped by 0.11 per cent; the
NSE oil & gas gained the highest points by 0.89 per cent; food
& beverages inched up by 0.72 per cent; insurance moved up by 0.66
per cent, while the NSE banking maintained negative trend to decline by
0.99 per cent.

Analysts at
Proshare Nigeria, an investment advisory firm, said market activities
on Tuesday closed with “growing posture”, as more gainers came on board
while “bulls maintained dominance across sectors, as the NSE sectoral
indices closed with impressive figures.”

However, they said
that profit booking was noticed yesterday in the Banking, Other
Financial Institution, Mortgage and Foreign Listings sectors.

Stockbrokers at GTI
Capital, a stock broking company, said, “It is very likely that most
short positions (investors) will start running off with their profits
which in turn will create room for new entry opportunities,” adding
that “traders should position accordingly.”

Most active

The banking
subsector was the most active on Tuesday with 528.51 million units
valued at N5.69 billion as against the 614.00 million units valued at
N5.76billion recorded in the previous session. The volume recorded in
the sector was driven by transaction in the shares of First Bank, Unity
Bank, FinBank, Guaranty Trust Bank, and UBA.

The total volume of
363.88 million units valued at N4.69 billion traded in the shares of
the five stocks accounted for 46.61 per cent of the entire market
volume and their value represented 62.96 per cent of the market’s value.

The food and
beverages sector followed on the chart with 33.748 million shares
boosted by trading on the shares of Dangote Sugar, while volume in the
insurance sector was third with 26.245 million shares worth N39.906
million.

The number of
gainers at the close of trading session closed higher yesterday at 57
stocks, as against the 47 gainers recorded the previous session,while
losers closed at 18; same position with Monday’s record.

Northern Nigeria
Flour Mills topped the price percentage gainers with 4.99 per cent as
it closed at N43.96 from N41.87. The share price of Julius Berger
Paints attracted 4.96 per cent on its opening price to close at N9.74.

Meanwhile, the NSE,
on Tuesday, added the names of additional four stockbroking firms to
the list of suspended stockbrokerages that have not met the minimum
capital base of N70 million stipulated by the Securities and Exchange
Commission to dealing members of the Exchange.

The four firms are Capital Bancorp, Profund Securities, Santrust
Securities, and Vetiva Securities. The NSE, however, noted that 10 of
the suspended stockbrokerages have met the requirement.

The Nigeria Labour
Congress (NLC) and Union Bank management will meet later in the week
over the imbroglio in the bank. The bank last week sacked 13 staff for
participating in labour activities though the management said it was
“for violating bank rules.”

“A meeting has been
called for Friday this week in Abuja by the minister of labour,” Denja
Yakub, the assistant secretary, NLC, said yesterday, in response to an
enquiry on the matter.

Last week, the
labour union asked the bank’s management to reverse its decision not to
recognise the union within seven days and also reverse the layoff of
the 13 members of staff. The union added that without this, it would
shut down the bank offices nationwide.

Francis Barde, the bank spokesperson, said banking operations are going smoothly and unhindered.

“Our banking operations are smooth as we are in dialogue with the staff on their issues,” Mr. Barde said yesterday.

He said that it was the bank management that requested for the meeting with the minister of labour.

Union Tussle

Meanwhile, the
Trade Union Congress of Nigeria has spoken on the Association of Senior
Staff of Banks, Insurance and Financial Institutions (ASSBIFI) and
Union Bank controversy, after its silence since last year when workers
of the bank had open confrontations with their management.

In a statement
yesterday, titled ‘TUC position on the proscription of Union Bank
ASSBIFI’, the union said that it sees this as one of the numerous
attempts by the new management to reform and reposition the bank.

“The Trade Union
Congress of Nigeria (TUC), having watched and followed recent
developments as well as comments and reactions from interested parties
with regard to the decision by the management of Union Bank of Nigeria
(UBN) to formally withdraw its recognition of the bank’s unit of the
(ASSIBIFI), views this u-turn as a welcome development, even though
belated.

“The truth is that
the workers of Union Bank of Nigeria are bonafide members of the
ASSIBIFI whose national secretariat is located at Alausa, Ikeja, and
affiliated to TUC by the relevant laws. Unfortunately, some over
ambitious officers with the active connivance of a dominant external
interest hijacked the workers’ body in defiance of all known trade
union ethos and the extant laws of the federation, cornered its
check-off dues, and diverted its purse under the guise of voluntarism,
albeit ignorantly,” the statement read.

Last week, The
Association of Senior Staff of Banks, Insurance and Financial
Institutions (ASSBIFI), Ikeja division, said that it was helpless in
the travails of the staff of Union Bank as they are not members of the
association.