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The weak trading performances witnessed
at the Nigerian Stock Exchange (NSE) during the third quarter of the
year are expected to continue during the last quarter, some finance
experts have said.

Meanwhile, the NSE market
capitalisation closed on Monday at N6.194 trillion after opening the
day at N6.145 trillion, reflecting 0.79 percent upturn or over N49
billion gains.

Olugbenga Emmanuel, a finance analyst
at WealthZone Company, a portfolio management company, said the poor
financial results posted by “many quoted companies will not boost
investors’ confidence” in the last quarter; thus, “the expectation of a
weakened market sentiments.”

Mr. Emmanuel said, “Assuming we saw
positive results in the third quarter, investors’ patronage in the
market will be high during the fourth quarter.”

This is because more investment managers will want to take advantage of the opportunities, he said.

The equity research team at Investment
Option, a business advisory company, said shares selloffs, which
usually characterise trading activities during the last quarter of the
year because of festive season, are also expected to contribute to the
projected mix trading performances.

Political news

In his own view,
Bismarck Rewane, managing director of Financial Derivatives Company
Limited, a business consultancy firm, said political news will cause
“increased uncertainty in the market” during the last quarter.

Mr. Rewane, in a
‘Monthly Economic’ report for October, said the erosion of the naira in
the foreign exchange market will further make equities cheaper.

He said the recent
sanctioning of some quoted companies has also led to the “continued
lack of investors’ confidence in equity market.” He said investors are
presently in search of alternatives to equities. For example, he said
investors are turning to the fixed income market.

However, he said if
AMCON starts operations during the period in view, the nation’s capital
market should recover, adding that “announcement of the preferred
bidders of rescued banks” could boosts investors’ confidence.

Mr. Rewane sees the
possibility of the NSE market capitalisation, during the quarter,
hitting N7.1trillion from its current N6.1 trillion region.

Third quarter trading

In the third
quarter of the year, spanning July to September, the stock market
recorded transaction volume of 17.74 billion, valued at N153 billion in
394,180 deals.

This was a decline
if compared with the second quarter when the market recorded
transaction volume of 27.95 billion, valued at N245.2 billion in
559,532 deals.

The Exchange’s information department acknowledged that “market performance was unimpressive during the third quarter.”

During the third
quarter, the banking subsector was the most active, measured by
turnover volume, with traded volume of 9.8 billion shares, valued at
N78.1 billion, and exchanged in 210,134 deals.

The insurance
subsector was second with traded volume of 2.2 billion shares, valued
at N2.23 billion, and exchanged in 16,521 deals; while the
conglomerates subsector was third, with transaction volume of 984.33
million, valued at N9.11 billion, and traded in 14,953 deals.

The live coverage of the rescue of the 33 miners who were entombed in Chile’s copper and gold mine for 69 days captured a global audience. It was one of the few moments when good news eclipsed the bad. It was a celebration of human resilience and a picture of the efforts of humanity to search for resources at extreme locations. Spare a moment to ask how many miners would have emerged alive if such an accident had occurred in your country.

In all the celebrations that followed the rescue, few questions were asked about why the mine collapsed in the first place. Was this a rare occurrence here and elsewhere? It is reported that the San Jose mine was so unsafe in 2007 that it had to be closed down for a while. We note that on 30 July, six days before the mine accident, the Chilean labour department had warned again of “serious safety deficiencies.” Until the 33 miners got sealed up in the mines, the government is not known to have taken any action.

Official data in Chile shows that 373 workers died in mining accidents in the last decade. In 2010 alone, 31 lives have been lost.

The mining sector is Chile’s main economic powerhouse. The largely privatised mines reap huge profits. However, fatal mining accidents in this country is as high as 39 every year. As the miners emerged from the tomb, the government lapped up the limelight – who wouldn’t – and the applause that resounded across the globe. It was also interesting to see President Evo Morales of Bolivia visiting the mine to meet with the lone Bolivian miner who was among the rescued men. This miner had immigrated to Chile for lack of employment in his home country. President Morales offered the man a promise of a job as well as a house. Hopefully, it will not be a job in a Bolivian mine.

With regards to the San Jose mine, in 2007, there was a complaint filed at the Chilean appeals court and the National Geology and Mining Service by workers of the company together with unions of other companies following deaths in the mines. At that time, the workers demanded the closure of the mine due to poor mine ventilation and lack of proper escape routes. The mine was shut on 22 September 2007 and reopened in 2008, without any changes in the safety provisions.

Stories of industrial accidents emerge regularly around the oil industry. The oil spills of the Niger Delta are daily in occurrence. The massive sludge spill from an aluminium company in Hungary raised huge safety issues about industrial practices, but was almost eclipsed by the reports of the Chilean rescue efforts. As this piece is being written, reports are emerging of a collapsed mining tunnel in Ecuador where four miners are said to be trapped.

As pictures of the families of the Chilean miners camping at the site ran on television screens and websites, viewers could not pick out the fact that some key players were missing. We are talking about figures such as Alejandro Bohn and Marcelo Kemen, the businessmen owners of the San Esteban mines. They left the mine two days after information was obtained that the miners were alive. They did not return there for over two months.

Mining deaths

Thousands of deaths are recorded annually in mining accidents around the world. Recorded figures run as high as 12,000 deaths of workers in the sector every year. In China alone, 2,631 miners died in 2009, while 200 perished in Sierra Leone. In the USA, 26 fatal accidents at her mines were recorded in 2007, and 23 in 2008.

Recent deaths from mine accidents in South Africa are 309 in 1999 while 220 died in 2007. In 2008, the deaths added up to 171, while 165 died in 2009. In the first half of this year, 67 deaths were recorded. A rockfall accident in the Marikana mine killed 6 mine workers.

It is shocking that only 24 countries have ratified the Safety and Health in Mines Convention of the International Labour Organisation (ILO) signed in 1995. Chile has not ratified this instrument.

Some analysts have argued that there is already no need for certain minerals to be mined anymore, as enough of the substance have already been brought out of the mines; an example is gold.

As for crude oil, there is an urgent need for the world to move away from fossil fuels and embrace renewable energy sources. The direct and indirect deaths resulting from mining and utilization of these products should urge us to pause and think.

The resurrection of the Chilean miners, and their return from the bowels of the earth may receive our applause, but we cannot continue to push our luck with unsafe mines, reckless pursuit of capital, and cheap dispensation of human lives.

The retreat witnessed at the Nigerian Stock Exchange (NSE) on Tuesday continued yesterday, as the performance of equities closed on a negative note.

The market capitalisation of 199 first-tier securities closed lower, as market net worth dropped by N78.64 billion at the close of Wednesday’s transaction. The NSE All-Share Index retreated by 1.26 percent, to close on a negative note.

Market watchers said equities’ value declined because short term traders focused on reaping part of the attractive profit recorded in recent rally sessions.

Equity research analysts at GTI Capital Limited, a stock brokerage firm, said most investors were scared-off the market due to the slight drop noticed on Tuesday.

“It sounds wise to take the little profit before it goes with pull back. Nevertheless, we advise that all investment decision should be linked with trend on each security; panic selling should be strictly avoided,” the analysts said.

The Exchange sectoral indexes reflected selling activities yesterday as NSE-30, which measures the performance of blue chips in the market, dropped by 1.21 percent. The NSE Food/Beverages dropped the highest points by 2.25 percent, followed by Banking, which dropped by 1.97 percent; the Oil/Gas dropped by 0.67 percent, while the NSE Insurance, the only gainer, appreciated by 0.23 percent.

Most active

The banking subsector on Wednesday led on the most active subsector table with 311.78 million shares valued at N1.65 billion, as against the 217.45 million units valued at N1.92 billion recorded on Tuesday.

The volume in the subsector was driven by shares of Unity Bank, Oceanic Bank, BankPHB, First Bank, and Guaranty Trust Bank. The total volume of 183.51 million units, valued at N899.87 billion, traded in the shares of the five stocks, accounted for 45.36 percent of the entire market volume.

Gainers decrease

The number of stocks that gained at the close of trading session on Wednesday closed lower at 14, as against 30 stocks recorded the previous day, while losers closed higher at 38, compared with the 28 recorded on Tuesday.

Custodian Insurance and Honeywell Flour topped the price gainers’ chart with an increase of 13 kobo and 11 kobo on their opening prices of N2.62 and N5.27 per share respectively. On the flip side, Flour Mills and Cadbury topped the chart with a decrease of N1.54 and N1.48, to close at N71.01 and N28.31 per share respectively.

Meanwhile, the Exchange, in a statement on Wednesday, said that Dangote Cement, which is billed for listing on 26th October, has submitted its unaudited results for nine months ended September 30.

Savannah Bank, whose licence was restored 18 months ago, says it has other issues to address than the recapitalisation deadline given by Central Bank.

The bank, which was ordered to be reopened in February 2009 by the Court of Appeal, was given 18 months to raise N25 billion for its recapitalisation.

“The present state is that the verification exercise of assets and renovation is going on,” said Wemimo Ogunde, the lawyer who argued the bank’s case. “We cannot talk on recapitalisation at this stage. Right now, we are concerned about… the customers who want to get their money back and those who want to remain.”

Mr. Ogunde said that there have been meetings with the Central Bank on the matter, but he would not say what the outcome of the meetings was.

“The bank has just completed its verification exercise, to know the state of the branches, and the assets of the bank,” he added.

The Central Bank did not confirm whether an extension will be granted to the bank, but confirmed that the bank was yet to raise the N25 billion capital required to put the bank back on track.

“With the information we have, they have been doing a lot of things to raise the capital, but there is no information reaching the CBN confirming that such capital has been raised,” said Mohammed Abdullahi, the Central Bank spokesman.

On Monday, a newspaper reported that First Inland Bank has begun moves to sell property belonging to a former governor of Enugu State, Jim Nwobodo, for failing to settle a N258 million loan he took to help in recapitalising Savannah Bank.

Depositors and shareholders of Savannah Bank, who were excited after the ruling and the bank’s licence restoration, may have to wait longer before accessing their funds, since the Central Bank has outlined conditions under which it can reopen for business.

Last August, the Central Bank’s governor, Sanusi Lamido Sanusi, said even though its licence have been returned, the bank must show proof of strong financial capacity, a new business model, and foreign or local partners, to show that they are ready for business before it can extend any assistance to the promoters of the bank.

“Of course, with non performing loans, if they have collateral, we can buy the non performing loans. If they want support similar to the ones we have extended to other banks, CBN will give them all the support that is reasonable,” Mr. Sanusi said.

A
constitutional crisis looms as concession granted Bayelsa State to
receive extra derivation revenue for nine mega offshore fields may
trigger legal agitations from other oil producing states in the
federation.

The
Bayelsa State government, in a letter dated February 16 to the then
acting president, Goodluck Jonathan, had requested approval for the
attribution of nine oil fields to assuage negative impact of the
delimitation of maritime boundaries of littoral states by the National
Boundary Commission (NBC) in the wake of the promulgation of the
Offshore/Onshore Dichotomy Abrogation Act 2004.

Timipre
Sylva, the governor, who signed the letter, listed the oil fields,
which included some of the country’s biggest deep offshore oil
concessions, like the Agbami, operated by Chevron, with proven oil
reserve of over 770 million barrels; Bonga, operated by Shell, with
proven reserves of over 1.5 billion barrels; and Akpo, operated by
Total, with proven oil reserves of over 630 million barrels.

Others
include Chota oil field, with 60 million barrels reserve by
ConocoPhillips; N’Golo oil field, 100 million barrels reserve by Elf
Petroleum Nigeria; Nnwa Doro oil field, by Statoil; and Aparo by
Chevron.

Mr.
Sylva said the delimitation has put Bayelsa State in a disadvantaged
position in the allocation of revenue since 2004. He drew attention to
the impact of ecological damage to the state’s coastline, pointing out
that the exercise did not attribute the oil fields and wells to the
littoral zone of the state, “despite the huge security challenges,
increasing environmental and health concerns, and the state’s massive
contributions to the amnesty programme.”

The
presidential concession would make Bayelsa State the highest derivation
revenue earner among the oil producing states in the country.

However,
following the approval of President Goodluck Jonathan on August 31, the
other littoral states are poised to equally demand their share of
derivation revenue based on the delimitation of their location beyond
the 200-metre isobath of their seaward boundaries.

Available
data for the Revenue Mobilisation Allocation and Fiscal Commission
(RMAFC) on the revised 13 percent derivation indices for July, obtained
at the weekend, based on the concession, put total oil production for
Bayelsa State at 15,995,773 barrels, ahead of Rivers (13,317,840
barrels), Akwa Ibom (12,796,954 barrels), and Delta (11,163,493
barrels).

Prior
to the concession and subsequent revision of the volume of oil
production figures attributable to each state, Akwa Ibom topped, with
13,905,432 barrels, followed by Rivers (12,636,795 barrels), Delta
(11,163,493 barrels), and Bayelsa (10,313,368 barrels).

Legal breach

The
concession to Bayelsa State to enable it earn derivation revenue from
oil wells lying beyond the 200-metre isobath, according to some
lawyers, is in breach of the Offshore/Onshore Dichotomy Abrogation Act
2004 in the application of the 13 percent derivation principle.

Innocent
Ogboru, a Port Harcourt-based legal practitioner, said the decision may
lead to agitations and court actions by other states, like Lagos, which
also has oil wells located beyond the 200-metre isobath in waters
within their boundaries.

“The
new twist in the calculation of oil derivation revenue will reduce the
amount of net revenue available to the Federation Account for
distribution to the three tiers of government, consisting the 36 states
of the federation and the 774 local government councils, as well as the
Federal Capital Territory (FCT), after the deduction of derivation
payable to oil producing states,” Mr. Ogboru said.

The
2003 interpretation of the Supreme Court judgment in the resource
control suit instituted against the Federal Government over the
implementation of the offshore/onshore dichotomy, which ended the
controversy, did not include revenues from oil wells outside the
statutorily allowed 200-metre isobath as part of derivation calculation.

With the decision
of the Central Bank of Nigeria (CBN) to discontinue defending the
value, the naira may be facing imminent devaluation, some financial
analysts have said.

CBN governor,
Lamido Sanusi, told Reuters on Monday that the value of the naira need
not be maintained “at all costs”, though he predicted the currency
would remain stable. This comes after several months of meeting
increasing demands for foreign exchange, which has taken its toll on
the foreign reserves.

Nigeria’s foreign
reserves, which peaked at $62.24 billion in mid-May 2008, has
depreciated by over 43 percent since then, closing last week at $35.24
billion.

Mr. Sanusi further
said “exchange rates have multiple equilibria, and equilibrium exchange
rates will depend on what we see as the long-term sustainability of the
reserve positions.”

A financial
analyst, who spoke off record, said though the foreign reserves are
still at comfortable levels, the trend of withdrawals in the last few
months is a cause for worry.

“The last time the
naira was devalued was when many portfolio managers left Nigeria at the
thick of the global financial crisis. The situation has not changed
pretty much and even many diaspora Nigerians have reduced the amount of
money sent back home. The CBN is now the major source of foreign
exchange.”

He said the lack of
transparency on how the foreign reserves is calculated also puts doubt
on how well the economy is being managed.

“If the budget
benchmark is $45 dollars, and we have had higher prices in the last few
months, how come the excess crude account is not replenished? Crude oil
prices have increased, production has gone up, but reserves are
dropping,” he said.

Naira defence versus reserves

An indication of
the direction of the currency market emerged last week as the naira
sold for N150.01 at the official Wholesale Dutch Auction System (WDAS)
window, for the first time in several months. At the interbank market,
the naira sold for 152.25 to the dollar, with dollar demand
outstripping supply at the Central Bank’s bi-weekly forex auction.

Prior to now, the
naira had fluctuated between N148 and N149.50 at the official window, a
band that it had maintained since 2008. A total of $550 million was
offered at the WDAS last week, while $771.65 million was demanded. The
total sale stood at $707.65 million, representing 91.71 percent of what
was demanded.

Doyin Salami, a
member of the Monetary Policy Committee of the CBN, said at the August
Breakfast meeting of Nigeria South Africa Chamber of Commerce, that the
government has to make a choice whether to defend the value of the
naira, in which case, it could commit huge sums from the reserves to
meet demand; or could decide to devalue the naira in order to reduce
pressure on funds.

“Should I defend
the naira or should I defend the foreign reserves? That is the question
for the Central Bank to answer. Whatever happens is going to have
effect on inflation,” Mr. Salami said.

The last time the
currency was devalued was in December 2008, when the rippling effect of
the global financial crisis took its toll on the naira, which had
remained stable for nearly three years before then.