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Egyptian mobile
group Orascom Telecom confirmed on Wednesday that it had received a
response from the Algerian government saying it was ready to start
talks over the purchase of Orascom’s Algerian unit Djezzy. “The company
has indeed received a letter from the Algerian government expressing
its readiness to start negotiations regarding buying the company’s unit
in Algeria,” it said in a statement published by the Egyptian stock
exchange. Talks with MTN over the acquisition of some of Orascom’s
other assets have continued, and the company said it will issue a
statement before Egypt’s bourse opens on Wednesday.

An increasing
number of Kenyan companies plan to start generating their own
electricity to help lower power costs, improve reliability of supply,
and add new sources of revenue.

Kaluworks, Kenya
Petroleum Refineries, and Unilever Kenya Tea are the three latest firms
to lodge applications for licences with the Energy Regulatory
Commission. They plan to put up plants to generate at least 109 MW.

“Cost of power has
become a major concern for every industry, and we don’t see the cost of
power coming down. So most people who can afford to produce their own
electricity are actually going for it,” said Vimal Shah, chairman of
the Kenya Association of Manufacturers.

South African power
utility, Eskom, swung to a full-year profit from a record loss last
year due to rising demand and tariffs, and said it was close to getting
the funds it needs to increase capacity.

Acting Chairman,
Mpho Makwana, said power supply in the world’s top platinum producing
nation and major supplier of gold would remain tight, until new
capacity comes onstream in 2013 and again after 2018, when more
capacity would be needed to meet fast-rising demand.

“Crises are still
looming. The system capacity will be even more vulnerable from as early
as 2011 onwards, and there is therefore, a need to urgently continue
with the current Eskom capacity expansion,” he said in a presentation
on Wednesday.

Nigeria’s foreign
exchange reserves slipped further to $38.79 billion weekend, from
$40.28 billion on May 17, the central bank said yesterday.

Increased dollar
demand at the central bank’s bi-weekly forex auctions in the last two
months had put pressure on the reserves, with the regulator raising its
weekly sales from an average of $500 million in March to $900 million
by April.

The central bank offered $500 million at Wednesday’s auction, its
highest single offer since last year’s currency crisis, raising fears
that sustained pressure could further deplete Nigeria’s reserves.

Katsina State
directorate of the National Youth Service Corps, is to cultivate maize
and sorghum (Guinea-corn) in its newly acquired farm in Danja local
government area of the state, this rainy season.

The coordinator of
the youth scheme in the state, Rhoda Kwaki, said this in an interview
with the News Agency of Nigeria (NAN) in Katsina on Wednesday.

“The Danja local
government has released an abandoned land for its proposed fish farming
project to enable us utilise it for our agricultural activities,” she
said.

Mrs. Kwaki said
that the farm, which covers eight hectares of land, also had all the
necessary facilities for fishery and poultry production.

The Sokoto State
commissioner for finance, Faruk Yabo, said the state government will
blacklist any bank found frustrating the state’s e-payment system.

Mr. Yabo told the
News Agency of Nigeria (NAN) in Sokoto on Tuesday that the warning
became imperative, due to recent reports that some of the banks were
yet to remit the salaries of some workers into the workers’ salary
accounts.

“The salaries were
ordered to be paid since May 25. The main account was debited on May
26. The sub treasury account was also credited on the same day,’’ he
said.

He added that the
system had been going on smoothly since January this year, noting that
some banks were playing tricks in posting salaries.

While lauding the
Central Bank of Nigeria’s measures to address credit accessibility in
the economy, finance experts have expressed scepticism about the
effectiveness of the schemes, given the level of success of previous
schemes.

Sunday Salako, a
member of the National Economic Management Team (NEMT) said unclear
procedures and corruption usually hinder the success of such schemes,
even though they were introduced with good intentions.

“The banks have
already started the disbursement of funds,” he said. “These schemes
have been around for a while, even before the crises, because banks
have been expected to put away some funds with the Central Bank for
SMEs.” “The Central Bank is seeking to revamp the aviation industry.”
He also confirmed that a N500 billion fund would be available for the
airline industry.

“It is because of
bureaucracy and corruption that we don’t get to see the effectiveness
of these schemes; we don’t get to feel the impact,” he said. “Look at
the issue of the textile bailout scheme some time ago, during that time
too, they approved money but till date, we don’t know which textile
companies in particular were able to take advantage of it and what
exactly they got from it.”

The Central Bank
said on Sunday that it was extending a N500 billion fund meant to
stimulate credit to the power and manufacturing sectors to the
country’s disturbed airline industry. Banks and the airlines have
continued to exchange press releases justifying their own sides of the
bargains, and finance analysts requesting the federal government to
intervene or risk leaving customers funds at risk as they warned that
some Nigerian airlines are actually in such awful financial state that
they could result in mergers or utter collapse of the industry.

The Central Bank has said it hopes to make these funds available to airlines at a payback time frame of 10 to 15 years.

“These airlines can
now partake from the fund, and those that are indebted to banks can
refinance their loans and amortise them over a period of 10 to 15
years,” Central Bank spokesman, Mohammed Abdullahi said.

He added that the
decision by the CBN is based on the fact that most of the Airlines are
heavily indebted to banks which constitute a risk to the banks
concerned and by extension the banking sector. “It is also to assist in
propping up the demand side to facilitate continued growth of the
economy. This, we believe, would help put off the much feared finance
crisis threatening the smooth operations of the aviation industry” he
said.

The battle for credit growth

The Central Bank
first announced the N500 billion facility in March as part of efforts
to revive credit to the real economy, which has been undergoing banks
tightened lending criteria after the Central Banks’ special audit of
the banks last year.

In May, the Central
Bank issued the guidelines for the establishment of a N200 billion
Small and Medium Enterprises Credit Guarantee Scheme to be wholly
financed by the Central Bank with the aim to fast-track the development
of the manufacturing SME sector of the Nigerian economy by providing
guarantee for credit from banks to SME’s and manufacturers.

It said N200 billion of the fund would allow banks to refinance
loans to manufacturers while the balance will be used to finance power
projects in Nigeria. Despite the Central Bank’s measures including
leaving its benchmark interest rate at six per cent since July, in
spite of double-digit inflation, to encourage banks to grow their loan
books and create credit assets among other measures, the impact so far
has been limited as bank credit to the private sector has remained flat
at around 0.3 per cent this year from about of 25 percent in 2008.

“The downside of
economic illiteracy”. “A rank lesson in how (and why) not to count
one’s chickens before the eggs hatch”. Whatever the choice of
explanations, the debacle at the Federal Accounts Allocation Committee
(FAAC) last week, over distributable funds for the first quarter of
this year was untidy. State governments having earlier rejected the
offer by the federal government to share N362.492 billion as their
allocation for the period, the federal government had to raid the
excess crude account in search of the extra N339.627 billion, which
sub-national accounting units felt was due them on account of the
mathematics of the appropriations for fiscal 2010.

Until the delayed
approval of the 2010 budget, the committee had divvied its pot based on
the assumptions of the 2009 appropriations. With the approval of the
budget for this year, and the new US$67/barrel benchmark price for
crude oil sales, state governments were no longer going to accept
allocations from the FAAC calculated on the lower benchmark (US$45pb)
used for the 2009 budget.

Thus, the
N339.627bn augmentation fund – which was taken out of the nation’s
savings – represented the oil price benchmark differential between
US$45pb, which had been used from January to March this year before the
budget came into implementation in April. However, with oil prices
trending southwards, it is difficult to see how the committee can
continue to meet this new level of financing. Sadly, the excess crude
account is so depleted that it cannot also continue to serve as a
source of augmentation support. Indeed, we should note that this was
not the reason why this fund was set up. Quite clearly, we confront a
very serious problem. Yet, the benefits from all this excitement lie
elsewhere. The cop-outs by which the problem was temporarily resolved
may yet teach us useful lessons.

The first such
lesson is without doubt, the need for us to save as a people. The main
deliverable here is to ensure that the budget is in surplus (public
saving), or that any deficit arises primarily because government hopes
to grow national income going forward. After which, we must create
conditions for all domestic prices, but especially for the price of
most public infrastructure, to move as close to the market-clearing
rate as is feasible, thus ensuring that price distortions no longer
encourage levels of private consumption inconsistent with the need for
private savings. If the Obasanjo administration had not done this, we
wouldn’t have had available to us the balance on the excess crude
account, which we have apparently used up so much that only US$4.6bn of
it remains, from a much healthier US$62bn in September 2008.

Nonetheless, public
sector savings in Nigeria acquire an additional use. The full extent of
the national need for investment in key sectors of the economy, require
that we start to discuss public sector financing in ways that ensure
that it helps the private sector to grow, acknowledges the capacity of
the economy to absorb additional infusions of cash, and recognises the
inter-generational responsibility that arises on account of the nature
of the country’s main source of such spending – a wasting asset that
however well we use it will because of present consumption be denied to
future generations.

On this score planning then ceases to be an act in wish fulfilment
as has been suggested by the penchant of the national assembly to lard
on more gravy on to the appropriation details every year. The US$67 per
barrel estimate on which the current year’s budget is based was always
suspicious. Although signs of a recovery in the world economy were all
over the place, a number of worries were still there. Unusual
government spending is still the main growth driver in most economies
that have showed signs of recovery.

In addition, problems with the
sovereign debt crisis in Europe ought to have alerted our planners to
the unintended consequences of the many fiscal stimulus packages that
governments across the world have in place. Besides questions of the
sustainability of the recovery, it also mattered that it has remained
uneven across regions. All of this still counsel caution in the
national planning and budgeting effort.