Nigeria Content Online

Nigeria’s
quest to make the naira an international currency may become a reality
after all, albeit the move is coming from another country.

Mauritius-based
Global Board of Trade Limited (GBOT) has said in the next six months,
it would start trading the naira alongside other African currencies on
its currency futures exchange. GBOT will offer commodity as well as
currency derivatives products.

A
currency future is a futures contract to exchange one currency for
another at a specified date in the future at a price (exchange rate)
that is fixed on the purchase date. Typically, one of the currencies is
the US dollar.

The
GBOT, which started operations on Monday, October 18, will offer a
platform for Africa’s commodity and currency derivatives landscape,
thereby helping to tie up future sale contracts for exporters and
importers, guaranteeing prices several months before production or
actual delivery.

The
GBOT’s managing director and chief executive officer, Joseph Bosco,
told Reuters recently that the exchange would start with 12 brokers,
and would also be looking at opportunities in Nigeria, Uganda,
Tanzania, and Egypt.

Currency offerings

“GBOT
is already offering futures contracts on the African currency pairs
USD/MUR (US dollar/Mauritian rupee) and ZAR/USD (South African
rand/US dollar). In the next phase, we plan to trade futures on
other African currencies on our Exchange,” Mr. Bosco said.

This
is the first time worldwide that two African currency futures will be
traded. He noted a marked interest from banks and from industry in
several countries on the continent for hedging on their currency’s
fluctuations.

The
naira has been fluctuating in recent weeks, dropping from about N147 to
the dollar at the beginning of the year to around N149/N150. At the
interbank market, the naira is trading at around N152 to the dollar.
This movement is due to the anticipation of either a possible
devaluation or uncertainties on political transition, thereby
increasing the activities of currency speculators.

“For
launching new African currencies on GBOT, we would first discuss the
matter with the Central Bank of the relevant countries and then take it
forward,” Mr. Bosco said through an email sent by Michel Gilbert
Deville, GBOT’s head of corporate communications.

‘We are not aware’

The
Central Bank of Nigeria (CBN) feigned ignorance of the development. “We
are not aware of anything like that,” said Mohammed Abdullahi, CBN
spokesperson.

Asked
about how disposed the Central Bank would be to such a venture by
another African country that would boost the reputation of the naira,
Mr. Abdullahi retorted, “I am not aware of anything like that. That is
the only thing I will tell you.”

However,
Lamido Sanusi, the CBN governor, said recently that the Central Bank
would consider introducing products that would discourage currency
speculation.

“Part
of what we are trying to do in the Central Bank is introduce a forward
market so that people can hedge that risk and then don’t feel any urge
to pre-liquidate outstanding dollar exposure,” Mr. Sanusi told Reuters
recently.

He
said there were indications that some people might be frontloading some
of their dollar obligations, resulting in the huge demand for foreign
exchange, a situation that would be ameliorated by a currency futures
market.

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.

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.

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.

Political leaders from Nigeria and Angola met over the weekend
to discuss practical ways of addressing the problem of instability and poor
governance in the Republic of Guinea Bissau.

Idi Hong, minister of state for foreign affairs, received a
visit from George Chicoty, a special envoy from the President of Angola on Friday.

However, Mr Hong told journalists that he could not disclose the
details of the discussions, only saying that Nigeria, which currently holds the
leadership for the Economic Community of West African States (ECOWAS) has
convoked an ordinary session of ECOWAS Heads of states to discuss the issue.

“We are already aware of the agreements and resolutions that
have been taken,” said Mr Hong. “Angola is the chair of Portuguese-speaking
countries, and with Guinea Bissau being a Portuguese-speaking nation, they are
interested about the resolution of this matter; that is why they are here.”

Mr Chicoty said that Angola and Nigeria share a good bilateral
relationship and he wanted to deploy this relationship in addressing the Guinea
Bissau challenge.

“We share a common view on security issues in Africa and in this
particular case, we do share views about how to restore security in Guinea
Bissau,” Mr Chicoty said.

He said both governments want to contribute to peace in Guinea
Bissau and said that Angola has already made a contribution of $20 million to
the security and defence reform sector in the country.

In September, ECOWAS met to discuss whether to send troops to
stabilise the deteriorating security situation in the nation. The country has
been plagued by coups and drug trafficking since independence from Portugal in
1974.

United Nations officials say Guinea Bissau’s tiny scattered
islands have become a hub for the drug trade between Latin America and Europe.

Billions of dollars worth of cocaine is believed to pass through the
impoverished state each year. A number of political slayinglast year, including
that of Guinea-Bissau’s president, army chief and a presidential candidate, are
likely linked to the trade, they said.

The Federal Government yesterday
announced the establishment of three new special commercial courts to
help in the enforcement of contracts in the country.

Minister of Finance, Segun Aganga, who
announced this yesterday in Abuja at the opening of the 51st Annual
Conference of the Nigerian Economic Society (NES), said the new courts,
which became operational in the last three weeks, would help expedite
the dispute resolution processes, to allow banks to begin lending to the
real economy.

Besides, the minister said government
has already submitted to the National Assembly amendments to some
existing laws that impede business transactions in the country, which
include the Evidence Act, Bankruptcy Act, and Land Use Reform Act.

“The problem has always been that even
when the banks decide to lend to individuals who have collaterals, it
was always difficult for them to have access to such collaterals, either
because some investors would go to the court and get injunction to
restrain them, or that some of our legal instruments are outdated.
Therefore, banks often cite this as reason for not lending for the
growth of the real economy,” he said.

The minister, who was reviewing
government efforts to grow the country’s real economy and bring
transformation to Nigerians, said apart from the establishment of an
Asset Management Corporation of Nigeria (AMCON) to help remove some of
the toxic assets in the banks and fund their balance sheets to make it
easier for them to lend, government is also setting up a Sovereign
Wealth Fund (SWF) with about $1billion capital to reduce the
vulnerability of the economy to external shocks.

He also said government, with the aid of
the World Bank, is in the process of establishing a sovereign asset and
liability risk management unit, as well as partial risk guarantees for
private sector power generators, under which individual independent
power providers (IPPs) would be required to obtain political risk
insurance to mitigate the political and termination risks in their
operations.

Recalling a recent global
competitiveness survey by World Economic Forum (WEF), which ranked
Nigeria 127th out of 133 countries considered, he said WEF officials
have been invited to visit the country within the next two or three
weeks to work with government to identify the reasons for this poor
ranking; show what other countries have done to improve their rankings;
and what Nigeria needs to do to improve its ranking.

The WEF report had noted that investors
and stakeholders in various sectors of the country’s economy lacked
constant and reliable supply of electricity, while the country was
having massive infrastructure deficit as well as health and
training/education challenges.

“We can no longer ignore some of these
reports. Whether we agree with them or not, it is important that we
continue to learn from what we are doing internally, and what others are
doing. That way, we can become one of the world’s top 20 economies,
which we all aspire to become by 2020,” Mr. Aganga said.

Head of the civil service of the
federation, Stephen Oronsaye, who noted government’s determination to
achieve macro-economic stability in the country, said there has been a
genuine effort to raise the standard of living of the people, as well as
put the economy on the path of sound growth and sustainable
development.

The theme of the conference was ‘Distortions in the Nigerian economy: Implications for Sustainable Development.’

Barring journalists from covering the daily activities of the
Nigerian Stock Exchange (NSE) will further dampens investors’ confidence, some
market operators at the Exchange have said.

Boniface Okezie, the National Chairman of the Progressive
Shareholders Association of Nigeria, said the NSE’s decision is not good for
the market because it negates the issue of transparency which the Exchange
“claims to be preaching”.

“It is an illegal act and it is totally not acceptable because
that is not the norm in Stock Exchanges around the world,” Mr Okezie said.

“The NSE gallery was built to allow investors and journalists
have access to the trading floor and witness daily transactions. This enables
them to make investment decision and report such while trading is going on. The
Stock Exchange is not a secret court where you bar the media from having first
hand information. The exchange has always been open since inception till the
days of the immediate past head. I think they have something to hide,” he said.

He added that the NSE is a public domain which was why the
Securities and Exchange Commission (SEC) deems it fit to remove the director
general for the interest of the general public.

“Strange declaration”

Femi Awoyemi, the chief executive officer of Proshare Nigeria
Limited, an investment advisory firm, said the move is unusual.

“This is a strange declaration from a SEC driven NSE which
actively cultivated the press on the serious and non-essential happenings at
the NSE.” Mr Awoyemi said the action is not only ludicrous but a clear signal
that the NSE “might have shut itself in the foot.” He added that the Exchange,
according to the SEC when it took over in the public interest, is an
organisation whose affairs cannot be shielded as a private entity.

“This can and should be seen as an attempt to censure
disclosures that have emerged about internal workings of the
regulator-operator. SEC released the table and either directly or indirectly
released sensitive internal information to select media houses always,” he
said.

“It simply defies logic that they would blame information
platforms about saying too much – that is giving too much credit to a group of
which some has sold their soul for cash. This is the act of a flip flop
administration.”

The NSE’s spokesperson, Sola Oni, had said at the weekend that
journalists will no longer be allowed at the Exchange, while those seeking to
make enquiries from relevant Exchange’s staff are to apply and wait for
adequate clearance.

Mr. Oni said it was a corporate decision aimed at raising the Nigerian
market to world standards.

Sub-Sahara African countries should consider tempering expansionary fiscal policy now that economic recovery is under way across much of the continent, the International Monetary Fund said on Monday.

Earlier this month, the IMF downgraded its 2011 gross domestic product (GDP) growth forecast for the region to 5.5 percent from 5.9 percent previously, but maintained its 5.0 percent prediction for this year.

“The focus of policy needs to shift toward rebuilding the policy buffers that served so well during the crisis,” Antoinette Monsio Sayeh, IMF’s director of the African department, said in a statement.

“In particular, expansionary fiscal policies will need to be tempered to make sure that public finances return to a sustainable path and public debt levels remain manageable.”

The region’s economies proved resilient largely due to sound policies in place before and during the financial crisis, which allowed the countries to use fiscal and monetary policy to dampen adverse effects, Ms Sayeh said.

Many African countries had steady growth, low inflation, sustainable fiscal balances and public debt, and rising foreign exchange reserves.

Some countries cut interest rates, and increased debt and spending levels to mitigate the effects of the crisis.

“Continued fiscal support is likely warranted only in a handful of economies where growth is set to remain below potential and which do not face debt sustainability issues,” the IMF said in its regional economic outlook.

Growth should soon be back close to the high levels seen in the mid-2000s before the crisis, Ms Sayeh said.

CAPITAL FLOWS

The financial crisis left higher unemployment in some countries and fiscal balances deteriorated, particularly in middle-income and oil-exporting countries, she said.

South Africa, for example, lost one million jobs in 2009 when the economy fell into recession.

The IMF warned that because of the fragile nature of the global recovery, risks remain weighted on the downside.

However, rising incomes and investment will keep lifting domestic demand for the remainder of 2010 and the resource-hungry Asian economies are expected to maintain their demand for African exports, the IMF said.

“The risks on the downside are slightly larger than the risks on the upside,” said Roger Nord, a senior adviser for the IMF’s Africa department, referring to the global economy.

“That being said, we see the risk of sliding back into global recession of being very, very small and the reason for that is the strong growth in emerging countries where we expect (2010) growth on average to exceed 7 percent.”