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Former president,
Olusegun Obansanjo, on Tuesday in Abuja, said the NEPAD-Africa Trade
Fair on indigenous products and services was aimed at promoting non-oil
products and services.

Speaking at the
NEPAD Business and Investment Forum, he said the trade fair would
encourage African countries to enrich their export potential for
economic growth and better living standards for the people.

Mr. Obasanjo said
the trade fair was about indigenous products and services, which
offered a major avenue for African governments to create a set of
bridges to partner with entrepreneurs.

Such partnerships,
he added, would promote access to techniques, knowledge, and finance
for economic prosperity of Africa countries.

“I see the business
investment forum as another way of promoting our sense of shared values
as well as a practical demonstration of our commitment to a prosperous
future in Africa,” he said.

In his keynote
address, Nigeria’s vice president, Namadi Sambo, stressed the need for
African countries to provide a conducive business climate to attract
foreign direct investment and promote domestic investment.

Represented by the
minister of commerce and industry, Jubril Martins-Kuye, Mr. Sambo added
that Africa should create appropriate systems, processes and policies,
as well as implementation strategies to facilitate intra-African trade.

Two recent
proposals are being discussed at the Nigerian Stock Exchange (NSE) with
brokers and regulators that would have far reaching implications for
the market. They would also have a revolutionary effect on investor
confidence and trading.

The first is the
proposal to migrate to a modern platform of Straight Through Processing
(STP), designed to eliminate settlement risk and ensure that all trade
settles cash versus securities. In other words, there will be no failed
trade and all trade ideally will settle same day.

This means that all
cash settlement will go straight to investor bank accounts, thus
eliminating the nagging issues of rogue brokers, who sell their
client’s shares without authorisation. This has been a major confidence
issue with some investors before and has contributed to labeling all
brokers as fraudulent, even though the records show that only few
brokers are involved in these condemnable acts.

For example, the
requirement for investor bank accounts, that will be tied to a CSCS
account for every investor, will enhance the ‘Know Your Customer’ rule,
as it will be another check for knowing who the account holder is. It
will eliminate mystery investors who launder money through the stock
market.

This has been a
major omission in the past. No one can open a brokerage account today
in any advanced market, without a corresponding bank account to keep
records of the inflow and outflow of cash. There is also the added
benefit to stock brokers, as it will eliminate customer payment duties
in their back offices, leading to more efficient back office operations
that are a major challenge for small broker offices, which currently
rely on manual processes that is fraught with errors and delays, with
the attendant client dissatisfaction. The resulting back office
efficiency will enhance broker income and allow focus on the more
important aspects of their functioning in the market.

The combined
benefits of implementing the programme and the expected results will
increase trading volumes and investor confidence, which should
translate to liquidity. The New York Stock Exchange, when it adopted
STP in 1995, after a 203 year history, witnessed huge volume increases.
It ushered in a new era with automated trading of this type and
shortened processing time; we expect the same to happen here.

Interestingly,
implementation will have minimum disruption, since all that will be
required will be for clients to submit their bank accounts to their
brokers, who will cross check their validity with the banks.

Improving trading economics

The other proposal
is aimed at improving trading economics by expanding the current
trading band. I see this as another forward looking proposal likely to
move the market forward quickly. Many analysts have questioned the
rationale for limiting the price movement to a daily plus 5 percent up
and minus 5 percent down, and have called for its elimination.

That seems drastic,
and may bring about volatility that we may not be able to manage. The
new suggestion to move gradually by increasing the current position to
plus 10 percent up and 10 percent down has my support. The current low
volume of trade and sluggish upward movement of prices means no
profitable trade can take place.

Even though average
daily volume has increased since the crash of 2008, the price decline
has meant average trading value has remained below 2007 and 2008
levels. This has affected broker/NSE revenues. By widening this trading
band, we will see increased activity, as investors will be more willing
to trade their accounts.

This will also
dramatically improve liquidity and provide a basis for the current
stabilised market prices to appreciate more steadily and give room for
faster correction of bubbles when they appear, as investors and brokers
trade to take profits quicker and correct market imperfections in stock
prices.

Margin guidelines

The margin
guidelines jointly provided by the Central Bank of Nigeria and the
Securities and Exchange Commission seem to be an overreaction that will
produce the bubble in share prices in the future if corrections are not
made before implementation.

First, they want
all bank stocks eliminated from margin lists for margin financing
purposes, a situation that affects 60 percent of market capitalisation.
Second, they want a 50 percent maintenance limit and then 10 percent
market cap on exposure to margin lending within banks portfolios.

While some of these
are best practices, concentrating margin financing to only 40 percent
may lead to the situation where the most liquid of these are the only
stocks banks will agree to finance, leading us back quickly to bubble
prices.

The second half of
the year 2010 has already showed evidence of what is likely to happen;
second half volume is lower than the first half for same period last
year. The advances/decline ratio is also reduced, while cumulative
volume for the year which was looking promising to exceed 2009, is now
weakening and may barely match 2009 levels.

I think the
appropriate thing will be to use percentage guides, for example, no
margin financed portfolio should carry more than 25 percent bank
stocks.

There is also the
need to fast track introduction of the margin list, as this will give
clarity to this aspect of the market and reduce panic selling. The
market needs to be sensitised to the technical details of how margin
accounts work, and how it will operate under the new guidelines. It
should be clear that margin accounts are an important part of the
market. They were not the problem, but their operation.

Victor Ogiemwonyi is the MD/CEO of Partnership Investment Plc, Lagos.

The
downward country rating of Nigeria by Fitch Ratings, the international
rating agency, may not significantly affect Nigeria’s debut at the
international bond market, says a financial analyst.

Nigeria
plans to raise $500 million from the international debt market before
year end. Razia Khan, regional head of research, Africa Global
Research, Standard Chartered Bank, London, said though the downgrade
was not unexpected, there were clear guidance on what the country
needed to do in order to retain the confidence of the international
investing community.

“Ahead of its maiden Eurobond, the market implications of the Fitch outlook revision are probably limited,” Ms. Khan said.

“However,
there is considerable market expectation that any eventual external
debt issuance by Nigeria is likely to trade tighter than
similarly-rated peers,” she said in her quick view of Nigeria’s latest
sovereign rating.

Concerns about spending

She said there have been concerns about the way Nigeria spends her revenue, a fact reflected in the Fitch Ratings report.

“The
drawdown of the excess crude account and fall in international reserves
are factors that have worried investors, but the Fitch move is
altogether more measured, and strikes a good balance between
considering near term cyclical pressures and the potential upside
further out,” she added.

The
excess crude account (ECA), which stood at over $20 billion in 2007, is
now about $500 million. Last Thursday, Nigeria’s foreign reserves
dropped to $33.91 billion, its lowest level in several years.

Ms.
Khan said there was need for the institutionalisation of oil savings,
fiscal improvements, including a removal of fuel subsidies, and greater
transparency overall in order for Nigeria to enjoy the confidence of
the international investing community.

“It
is important to note that the measures which Fitch has identified as
important for Nigeria’s outlook to return to stable are already being
implemented.

“For
instance, we understand that Fitch will view the passing of the Bill to
establish the Nigerian Sovereign Wealth Fund very positively,” said the
minister of finance, Mr Olusegun Aganga.

He
added that the Bill is being drafted, and expressed the hope that it
will receive a positive and speedy reception in the National Assembly.

Effect on sub national ratings

Fitch’s
downgrade also had a spiral effect on other ratings within the country,
as the ratings agency has revised Lagos State’s long-term foreign
currency rating outlook to negative from stable, and affirmed the
actual rating (BB-).

Samir
Gadio, emerging markets strategist at Standard Bank, said such a
development was expected since Lagos State’s rating and outlook were in
line with those of the sovereign. He said this does not necessarily
suggest deterioration in Lagos State’s operating environment.

Lagos
State is currently in the debt market to raise N275 billion in multi
tranches funds for developmental purposes. The latest entrance is the
N50 billion infrastructure renewal bond opened in July.

Last
year, Fitch also assigned Rivers State a long-term foreign and local
currency ratings of ‘B+’ and a national long-term rating of ‘AA-, the
highest subnational rating in the country.

The governing board
of the Petroleum Products Pricing Regulatory Agency (PPPRA) yesterday
met with officials of the Petroleum and Natural Gas Senior Staff
Association of Nigeria (PENGASSAN) in Abuja on ways of aborting a
crisis over a demand for the reinstatement of two members.

Sources revealed
that one of the key resolutions of the meeting was the immediate
reinstatement of the two officials on or before next week Tuesday,
ahead of the next meeting of the board.

But it was gathered
that even as the two officials are expected to be issued with fresh
letters, latest next Monday, reinstating them to their former positions
as well as being paid the backlog of their salaries and entitlements
for the period, it might not be smooth sailing for them to resume their
seats.

The affected
members , Phillip Salvation and Daniel Afiakurue, who were General
Managers, finance and administration, and operations until they were
suspended in September 2007, along with the then Executive Secretary,
Oluwole Oluleye, over allegations of impropriety and corruption by the
Federal Government.

After two years of
investigation by the Economic and Financial Crimes Commission (EFCC)
the three were recently cleared of all allegations.

Though Mr. Oluleye
has since December 2008 been retired with full benefits, the other two
officials, who still had long years of service, were yet to be
reinstated by the PPPRA management for lack of vacancy.

It was gathered
that the management had argued that it would be difficult to reinstate
the two, as directed by the office of Secretary of Government of the
Federation (SGF), as they were not consulted when the Federal
Government took the decision to suspend them from office.

Besides, the
management claimed that in the wake of the suspension of the three
officials, their positions were filled by new appointees, Gbenga
Komolafe, as acting General Manager (F&A), and Joseph Dogo as
acting General Manager (Operations).

Ultimatum

But PENGASSAN,
early this month, reportedly issued a 14-day ultimatum threatening to
embark on a nationwide strike if the directive by the SGF for the board
to find accommodation for the two was not met.

The crisis
degenerated, as the PPPRA management accused PENGASSAN of over-reaching
itself with its insistence on the reinstatement of the two officials,
since the issue had nothing to do with the welfare of its members, a
source said.

Joint conciliatory
committee meetings called for Kaduna between PENGASSAN executive
committee and PPPRA management to find a way out of the crisis was
reportedly ignored by Mr. Dogo on two occasions, resulting in the call
by the oil workers’ union for his immediate sack in line with the
dictates of labour laws, which stipulates that officials should be
summarily relived of their positions after three cases of
insubordination.

Prior to the
expiration of the ultimatum by the PENGASSAN last Thursday, it was
learnt that the PPPRA board had to take the matter before the Minister
of Labour and Productivity, Chukwuemeka Wogu, who called for an
emergency board meeting held yesterday to forge reconciliation between
the union and management, and avert the strike.

A growing African
food sector can yield private sector returns on the back of government
support, said a report on Tuesday, which also said that a global grain
reserve may be needed to protect consumers from price spikes.

Local initiatives
aiming for an African equivalent of the Green Revolution, which swept
developing countries in the 1970s and 1980s, needed coordination, the
report added.

For example, an
African Union (AU) strategy aimed to drive economic development through
investment in agriculture at a tenth of national budgets, given new
impetus by a 2008 food crisis, which prompted $20 billion aid for
agriculture.

“It’s a focus on
the great and proven potential of African agriculture,” said Imperial
College London’s Gordon Conway, chair of a panel of authors of the
report titled ‘Africa and Europe: Partnerships for Agricultural
Development’.

“We can continue to
parachute in sacks of grain, but it’s much better to focus on making
sure the seeds and fertilisers are present in the hands of the dealers
in the villages. We are in a period of optimism about the prospects for
Africa and African agriculture,” the report concluded.

The Green
Revolution in Mexico, India, and elsewhere met large increases in
yields through steps such as investment in irrigation, fertilisers, and
high yielding crops.

In Africa, cereal
yields were as little as one third those in developed countries, said
Lindiwe Majele Sibanda, another author, but she pointed to successes,
for example, in Nigerian cassava and of the adoption of higher yielding
rice varieties.

“Africa is now organised and ready for business,” she said.

The AU initiative
aim to achieve 6 percent annual growth in farm output by 2015, compared
with 3 percent annually over the past decade. Tuesday’s report cited
estimates that the sector may be worth $800 billion by 2030, compared
with $280 billion now.

It intends to
galvanise European private and public sector investment, following
similar investment in African farmland and businesses by large emerging
economies including China.

Private sector
investment would not over-turn problems of malnutrition, however, where
200 million Africans are under-fed and 5 million die annually from
hunger. This requires public support, possibly including a global grain
reserve to ease food price spikes which hurt the poor more, the report
said.

“Food price spikes,
particularly the one in 2007-08, had a devastating impact on African
consumers. Speculators drive these spikes higher than they would
otherwise be,” said Mr. Conway.

“These spikes need
some form of physical grain reserve to moderate them,” he added, saying
that he was not advocating a government takeover of commodity markets.

OPEC member,
Algeria, expects its energy production and exports to shrink in 2011,
pushing earnings from oil and gas down 4.5 percent on the forecast for
this year, the finance ministry said.

Revenues from oil
and gas sales abroad are set to decline to $42.2 billion from the $44.2
billion forecast for this year, according to a document drafted by the
finance ministry, which was obtained by Reuters.

The forecasts in
the document for 2010 and 2011 are both made on the basis of a nominal
average price for crude oil of $60 per barrel, excluding the influence
of price fluctuations on the forecast revenues.

Asked to explain
the forecast drop in earnings for 2011, finance minister, Karim Djoudi,
told Reuters: “It’s because, regarding quantities, production and
exports will decline.” Algeria supplies about a fifth of Europe’s
energy needs and is also the world’s eighth largest crude exporter.

Egypt is drafting
new legislation to boost investment in its mining sector, a minister
said in remarks published on Tuesday, as the country seeks to
capitalise on renewed interest in gold mining in its Eastern Desert.

Pharaohs once dug
up gold in the desert to gild amulets and sarcophagi, but the industry
faded in the 20th century largely because of curbs on foreign
investment imposed by President Gamal Abdel Nasser.

Other changes to Egypt’s mining code in 2008 improved patronage,
attracting firms such as Centamin and Canadian mining company, Nuinsco.
The Eastern Desert, littered with pharaonic mines, is now seen as a
potentially lucrative source of gold.

Oil dropped to
around 82 dollars per barrel on Tuesday, consolidating after two days
of gains, as the dollar rose, ahead of a report expected to show an
increase in U.S. crude oil stockpiles.

U.S. crude for
December CLc1 fell 60 cents to 81.92 dollars, losing ground after
rising almost two dollars in the previous two days. ICE Brent LCOc1
lost 42 cents to 83.12 dollars.

Oil also came under
pressure from a rising dollar. Crude prices are more dependent on
dollar fluctuations than at any time in the last 14 months, as
speculation intensifies that the U.S. Federal Reserve will embark on a
fresh round of monetary stimulus to boost recovery.