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Already facing investigations on two fronts into
its practices in the mortgage market, Goldman
Sachs came under pressure from investors as well on Friday.

After reports on
Thursday evening that federal prosecutors had opened an investigation into
trading at Goldman, raising the possibility of criminal charges against the
Wall Street giant, the firm’s stock was downgraded on Friday by two analysts. Standard
& Poor’s lowered its rating from hold to sell, and Bank
of America Merrill
Lynch dropped its rating from buy to neutral, citing the mounting
investigations.

Investors
responded by sending the stock down 9 percent in midday trading, to $145.89,
contributing to an overall decline in financial shares on Wall Street.

The financial
impact of Goldman’s troubles continues to mount. Since the Securities
and Exchange Commission announced on April 16 that it had filed a
civil fraud suit against the firm, its stock is down 20 percent, removing
about $20 billion from its market capitalization. The drop is all the more
striking given that Goldman delivered a blockbuster
quarterly report last week, with first-quarter earnings doubling from last
year.

Goldman has
vigorously denied the accusations by the S.E.C., which accused the firm of
defrauding investors involved a complex mortgage deal known as Abacus 2007-AC1.

On Thursday
evening, people familiar with the matter said the S.E.C. had referred its
investigation to prosecutors for the Southern District of New York, which has
now opened its own inquiry. While the investigation was said to be in a
preliminary stage, the move could escalate the legal troubles swirling around
Goldman.

Federal
prosecutors would face a higher bar in bringing a criminal case against
Goldman, whose role in the mortgage market came under sharp scrutiny this week
during a marathon hearing in the Senate. In contrast to civil cases, the burden
of proof is higher in criminal ones, where prosecutors must prove their case
beyond a reasonable doubt.

The stakes are
high for Goldman, but they are also high for the United States attorney’s
office. Prosecutors from the Eastern District of New York lost a case last year
filed against two hedge fund managers at Bear
Stearns, whose collapse presaged the turmoil on Wall Street.

Prosecutors
built much of that case around internal e-mail messages at Bear Stearns, much
the way the S.E.C. and senators have pointed to e-mail messages at Goldman in
which employees had disparaged investments that they were selling to their
customers.

In the end,
however, prosecutors were unable to
prove to a jury any criminal wrongdoing by the Bear Stearns employees.

A spokesman for
Goldman declined to say whether the bank knows about a criminal case, but he
said “given the recent focus on the firm, we’re not surprised” to
learn about a criminal inquiry. The spokesman said Goldman would cooperate with
any investigators’ requests for information.

A spokeswoman
for the Southern District also declined to comment.

The opening of
the Justice Department investigation was first reported Thursday evening by The
Wall Street Journal’s Web site.

Goldman has said
it will defend itself against the S.E.C.’s accusations. The firm’s executives
discussed the case last week during their quarterly earnings call, and this
week, they testified about their mortgage operations in a nearly 11-hour
hearing in Washington before a Senate subcommittee.

That hearing
focused broadly on Goldman’s mortgage operations, and the Senate subcommittee
released reams of new internal documents from Goldman. The Senate Permanent
Subcommittee on Investigations is looking into many other mortgage deals beyond
the one cited by the S.E.C.

The deal at the
heart of the S.E.C. case was one of 25 mortgage securities that Goldman created
in a program it called Abacus. The agency has hinted that it may expand its
inquiry to other Wall Street firms.

Those securities
were synthetic collateralized
debt obligations, which are bundles of derivatives that mimic the performance of mortgage bonds. The securities allowed people who
believed that the housing market would collapse to buy insurance against
certain mortgage bonds they thought might fail. When those mortgage bonds did
fail, the investors in the Abacus deals suffered major losses.

The Abacus deals
were, however, very profitable for the parties that were negative on the
housing market. In the Abacus 2007-AC1 deal, the hedge fund manager, John
A. Paulson, raked in about $1 billion when the bonds he helped select hit
trouble.

Mr. Paulson has
not been named in the S.E.C.’s case because he was not involved in marketing
and selling the deal.

Many in Congress
have been pressing for a criminal inquiry. This week, 62 House members sent a
letter to the Justice Department asking it to conduct an investigation into
Goldman’s actions.

© The New York Times

Nigeria’s First Bank said on Friday it planned to form a listed holding
company which will own the bank and its subsidiaries to comply with reforms to
the sector planned by the central bank.

Chief Strategy Officer Onche Ugbabe said the bank would likely be de-listed
to be replaced on the stock exchange by the group holding company. He gave no
timeframe.

“The group holding company will be the listed entity and will be 100
percent owner of the bank, as well as of the other subsidiaries,” Ugbabe
told an investor conference call.

Central Bank Governor Lamido Sanusi has said he intends to do away with the
universal banking model and separate banks’ core lending business from more
speculative capital market activities — such as stockbroking, asset
management, private equity and venture capital.

First Bank is one of Nigeria’s first lenders to clarify how it plans to
comply with the central bank’s reform agenda. Others have said they plan to spin
off subsidiaries but have not yet given details.

Chief Risk Officer Remi Odunlami said First Bank was targeting 10 percent
growth in its loan book this year, with the focus on long-term credit.

“We have a liquidity ratio of 45 percent which means we have excess
liquidity and that will be channelled to loans,” Odunlami told the call.

The central bank has said it is concerned about banks’ reluctance to lend in
sub-Saharan Africa’s second-biggest economy and has kept its benchmark interest
rate on hold at 6 percent for months to try to stimulate the flow of credit.

First Bank swung to a pre-tax profit of 15.4 billion naira in the first
quarter of this year from a loss of 9.8 billion naira a year earlier.

The bank said it was targeting 20 percent return on equity in 2010, up from
15.9 percent at the end of March.

REUTERS

It is a bad sign
when markets are led by rumour. For the prudent investor, simply
staying up to date with the array of overland information sources on
public companies can be a full-time job. To add subterranean and back
alley news filtering to that workload is an unwelcome prospect. Yet,
sometimes, it almost seems as if that is where we are. In the last two
months, I have received material information about two major companies,
which are yet to issue any official statement on the events long after
they surfaced in the public domain. While companies are within their
prerogative in declining to respond to rumours, that is a poor excuse
and unforgiveable disservice to the trust that shareholders place in
them for transparency. Evasiveness will not cut it.

The first piece of
news had to do with the departure of the chief executive of a leading
conglomerate, and the second with a case of massive fraud at a leading
bank. Both companies have been studiously silent on these events,
leaving investors to grope in the dark for the true situation. Such
deliberate disdain for disclosure inclines the hasty to believe the
rumours. Worse, it besmirches the reputation of the boards at these
companies as unaccountable, implicated, and haughty.

On March 8, 2010,
an acquaintance informed me that Nosike Agokei, the chief executive
officer of John Holt, one of the oldest companies on the Nigerian Stock
Exchange, who was only appointed to that position in August 2009, may
have resigned from the company in unclear circumstances. Still
unconfirmed are stories that Agokei resigned over the overbearing
interference of non-executive board members and the disfavourable terms
of partnership with its UK-based parent. Whatever the reasons for his
departure, if indeed it is true, the company ought to have made a
formal statement notifying the public of the change at the top and
which officer will fill that office till a substantive appointment is
made.

Malfunctional corporate communications

The company’s
failure to do so is indicative of malfunctional corporate
communications and governance mechanisms. Right now, the link to
Agokei’s profile page on the John Holt website,
http://www.jhplc.com/corporate/directors/board-nagokei.php, returns a
404 error page, while the Management Page at
http://www.jhplc.com/corporate/management.php is blank. Similarly,
Nosike Agokei’s name has been removed from
http://www.jhplc.com/corporate/main-board.php , which lists the names
of board directors. I am unwilling to believe that the erasures are due
to accidental deletions by the website administrator.

Five weeks later,
on April 13, 2010, I received a Google alert from Zenith Bank with the
title, ‘Board Room Crises Rocks Zenith Bank as Zenith Manager Defrauds
Bank of N4.5Billion.’ The link, which led to a story on the Sahara
Reports website, exposed a mind boggling fraud of several billions at
one of the bank’s Abuja branches. Five days after that email alert, a
national daily carried the headline ‘N7.4bn fraud rocks Zenith Bank’,
inflating the original sum by close to N3 billion.

Although both
reports say that the bank’s management has reported the matter to the
police, its refusal to issue a statement on the situation, no matter
how terse, has left room for speculation. Currently, customers and
investors are asking several questions about Zenith Bank’s internal
controls, branch supervision, and risk management. When did the bank
become aware? Was the fraud committed over a single transaction or over
a series? This crescendo will not die down so easily.

Agent-principal dissonance

Generally,
agent-principal dissonance is most pronounced in the sphere of
information. However, while developed jurisdictions have taken bold
steps to ensure that the asymmetry is flattened, Nigerian companies and
regulators continue to act like it is all good.

In fact, because
they have been kept in the dark for so long, investors do not even know
that they should hold companies responsible to update them on certain
types of information. Disclosure is not a favour. It is not at
companies’ discretion. It is not a ‘dash’. It is a duty and the mark of
responsibility.

Disclosure has real
world implications on the cost of a company’s capital and valuation.
Good disclosure practices benefit both companies and their investors,
while bad disclosure culture hurts both, leading investors to price
risk wrongly thus misallocating assets, and hamstringing companies from
accessing the funds they need at attractive rates to fund their
operations and growth. In the end, the market suffers and everyone is
worse off.

In the past year,
there has been a lot of auditioning about the need for greater
disclosure among companies. Sadly, it appears that while the regulators
and boards may have crammed the lyrics, they have not learnt the
melody. Even if both companies issue statements today, they would still
have fallen short because disclosure is nothing if it is not timely.
Peer exchanges like the London Stock Exchange recognise this need by
providing services like the Regulatory News Service (RNS) for prompt
dissemination.

Our rejoicing at
the first wave of disclosure that swept through the banking sector
should not blind us to the fact that transparency is not limited to
financial statement matters or toxic assets alone. Admittedly, while
the journey has started, it is ‘not yet uhuru’. We still have many
rivers to cross. Let us hope we can find our way home.

The writer is the managing director of a full service investor relations firm based in Lagos.

European stocks
rose modestly and the euro halted its decline Thursday, a day after the
International Monetary Fund promised to increase the 45 billion-euro
aid package for Greece to as much as 120 billion euros over three years
to quell the fund’s biggest crisis since the Asian woes of 1997.

The fund is racing
to conclude an agreement for more painful austerity measures from
Greece by Monday, clearing the way for the government to receive
funding and reassuring investors worldwide that European debt is safe.
On Wednesday, Dominique Strauss-Kahn, the I.M.F.’s forceful managing
director, made the higher aid pledge in a private meeting with German
legislators. The package would be the equivalent of up to $160 billion
and would come from both the I.M.F. and from other countries using the
euro.

But as has
frequently been the case during Europe’s debt crisis, the promise of
help was overshadowed by more disturbing news – in this case a cut in
the debt rating of Spain by a major agency just a day after downgrades
for Portugal and Greece.

The growing fear is
that the fallout from Greece and even Portugal – which together compose
just 5 percent of European economic activity – could be a mere sideshow
if Spain, with its much larger economy, has difficulty repaying its
debt.

In European morning
trading, the euro was at $1.3237, up slightly from $1.3220 late
Wednesday in New York. The Euro Stoxx 50 index, a barometer of
euro-zone blue chips, rose 0.8 per cent, and the FTSE-100 index in
London rose 0.5 per cent.

Trading in U.S.
index futures suggested Wall Street stocks would open slightly higher,
after the Dow Jones industrial average rose 53 points Wednesday to
close at 11,045.27.

Most major Asian
markets fell, with both the Hang Seng index in Hong Kong and the
S&P/ASX 200 index in Sydney dropping 0.8 per cent. Tokyo markets
were closed for a holiday.

In many ways, the
current troubles in Europe go to the heart of the fund’s new mission to
serve as a firewall in the financial crisis – an objective that was
bolstered by $750 billion in fresh capital from Group of 20 countries
last year.

Unlike its previous
efforts in smaller, emerging economies in Asia in 1997, and more
recently in Hungary, Romania, Latvia and Iceland, the fund has been
hamstrung in its efforts to act quickly and decisively by political
concerns within the European Union, which insists on assuming a leading
role.

“It is a problem,”
said Alessandro Leipold, a former acting director of the I.M.F.’s
European department. “It should not be that difficult – they did it in
Hungary and Latvia. But the egos are different in industrialized
countries.”

A stitch in time

A case can be made
that if Greece had sought help from the fund late last year after the
forecast for its budget deficit doubled, the amount of support needed
to reassure investors would have been much less than the 120 billion
euros that even now might not be enough.

In that vein, Mr.
Leipold said Portugal and Spain should ignore any stigma associated
with an I.M.F. program and make the case to the European Commission in
Brussels that asking proactively now for aid would soothe skeptical
markets and save Europe billions in the future.

“The market has seen its worst fears come true,” he said. “What it needs is a surprise on the upside.”

Concerns have
already surfaced in Congress that the broad demands of the sovereign
debt crisis will quickly exhaust the I.M.F.’s reserves and leave the
United States, the fund’s largest shareholder, with the bill.

Representative Mark
Kirk, a Republican from Illinois, said such a drain could occur if
Portugal, Ireland and Spain sought I.M.F. aid at the same time. Mr.
Kirk worked at the World Bank during the 1982 debt crisis in Mexico,
which came close to depleting the fund’s reserves.

“We have seen this movie before,” he said. “Spain is five times as big as Greece – that would mean a package of 500 billion.”

Mr. Kirk sits on
the House Appropriations Committee that oversees I.M.F. funds and said
that he had already asked for hearings on the fund’s ability to handle
a European collapse.

In Athens, the
Greek government had no choice but to seek an I.M.F. solution after its
costs of borrowing skyrocketed, but that has not made the negotiations
for aid any easier.

The fund has sent
one its most senior staff members, Poul Thomsen, who has overseen
complex fund negotiations in Iceland and Russia, to assist Bob Traa,
the official responsible for Greece, to work out a solution.

According to people
who have been briefed on the talks, the aim is to secure from Greece a
letter of intent for even deeper budget cuts than the tough measures
imposed so far, like reductions in civil service pay, in exchange for
emergency funds.

With Greece now
shut out of the debt markets, it has little leverage to resist –
especially in light of the 8 billion euros it needs to repay
bondholders on May 19. Analysts expect a deal by next week at the
latest.

The Minister of
Science and Technology, Mohammed Ka’oje Abubakar, tasks two agencies in
the ministry to exploit the possibilities of the local production of
solar cells and solar panels as key to solar energy supply.

The Minister who
said this when he visited the Sheda Science and Technology Complex,
Kwali and the National Agency for Science and Engineering
Infrastructure, Idu , both in Abuja, lamented that the agencies are not
proactive in research and development, which has potential for
commercialisation.

“There are some
good research works carried out by the technology complex, some of them
are ongoing and all of them have potential for commercialisation. But
unfortunately, very little commercialisation of these works have taken
place,” he said.

Solar cells and panels

In line with the
commercialisation efforts, the minister charged the complex to produce
solar cells in the laboratory. “You have all it takes to produce solar
cells. You have all the machines and the testing equipment for
production of solar cells. I am sure you will understand that solar
cell is critical to solar energy generation. This is your major
challenge now, to produce solar cells for the benefit of Nigerians.”

He said their
production will be complemented by the efforts of the engineering
infrastructure agency, which he said already produces solar panels,
adding that the agency has the requisite technical and human capacities
to execute the project.

Thomas Oberafo, the
Director General of the technology complex, said the agency is
determined “to use science and technology to contribute to the
development of our country.”

Anthony Oberafo,
Director of Physics Advanced Laboratory, disclosed that they have
produced samples of solar cells, adding that “what is left is to
improve on the efficiencies of these samples and once we are satisfied,
we try to work on the economics then bring in entrepreneurs who will do
the mass production,” adding that Nigerians will have solar cells in
commercial quantities by 2012.

The laboratory boss
argued that “depending on fossil fuel alone for energy is not too good.
For now, they may be sufficient because we have them all over the place
but eventually it will be a scarce resource. But the sun is there
forever. The percentage of energy mix attributable to solar is very low
all over the world but it is going to go up when people are able to
produce cheaper solar cells.”

Also, Olusegun
Adewoye, Director General of the engineering infrastructure hinted that
the agency will commence the production of solar panels in the third
quarter of 2010. “The building is ready, the equipment have been
imported and the human capacity is built. We are only waiting for the
Chinese contractors to install the equipment so that production can
start.”

The Nigerian
Communications Commission (NCC) and telecom operators have expressed
optimism over the commencement of the Sim card registration from May 1.

In a telephone
interview with NEXT, Reuben Muoka the spokesperson for the commission
said, “Any new sim card bought subsequently from May 1, 2010 must be
registered for life.”

The commission
announced in December that the sim card registration is part of efforts
to curb crime in the country, but the exercise will, however, begin
with new sim cards purchased by new subscribers.

Mr. Muoka explained
that the registration will be done online, adding that “operators are
expected to put all machinery in motion for the commencement of the
process. We suspect that they will sell what is called partially
activated lines, whereby, you may get a line but can only receive calls
or Short Message Service (SMS) but not able to make calls or send
texts. So, you must now go to a particular place where you will have
your sim registered before you can begin to enjoy these services,” said
Mr. Muoka.

MTN is ready

In an email
response to NEXT, Funmilayo Omogbenigun, the General Manager,
Communications, MTN Nigeria said, “Yes, MTN Nigeria is ready to
commence its Sim cards registration come May 1, 2010. We have installed
equipment that captures bio-metric and demographic data.”

Ms. Omogbenigun noted that the registration exercise will not affect the prices of Sim cards in the market.

Registration requirements

However, there are some basic requirements from new subscribers to ensure a successful exercise.

Visafone Nigeria
explained, “We need to capture subscriber’s name, phone number,
address, digital photo and biometrics (thumb & index finger print).
These are the specific requirements needed from the subscriber at no
cost to ensure the smooth flow of the process.”

Existing subscribers

The Communications
Commission, the industry regulator said it will handle the registration
of the active subscribers sims estimated in excess of 70 million, even
as it has not yet decided on the commencement date.

“We hope to start
within the next three months. The duration for the process will depend
on when we start, because we need to review when we begin and know what
kind of deadline is appropriate in this circumstance,” said Mr. Muoka.

Price Cap

Ahead of the Sim
card registration, the commission has also announced the introduction
of a price cap system for the benefit of subscribers.

Stephen Bello, the
acting vice chairman of the commission, in a recent statement said, the
regulator has developed a policy of price cap regulation, “where we
give a price and the competition can make you to operate within this
degree of freedom, but not beyond it.”

He argued that the
measure became necessary to forestall a situation in which operators
may “cooperate and try to maximize their profit”.

“Now we know for a
fact that the number of lines has increased, there is economy of scale
and you know that as you have advantages of economy of scale the unit
price comes down. We believe that the competition in the industry will
control prices,” added Mr. Bello.

Mr. Muoka
expantiated, “In order to make tariff to come down further just as the
interconnect rate came down last year, the expectation is that the
retail price will also come down. In order to actually make it happen,
we put a price cap that is, a price at which no operator will charge
above.”

He, however said
the price cap has not yet been determined, as such a judgment will be
based on “the market situation, what the competition is, the
interconnect rate and say no operators can charge above a certain
amount. We are going to review it, get more data from the operators
about their current rate and also do this in other services like SMS
etc., before implementing.”

Diamond
Bank Plc yesterday released its 2009 common year results, revealing a
loss before tax of N12.4 billion for the period, owing to large one-off
provisions, compared to profit before tax of N17.3 billion for the
comparable prior year period (December 2008).

Emeka
Onwuka, Managing Director of Diamond Bank, while commenting on the
results in a report made available to NEXT, said the period under
review has been challenging for the entire Nigerian banking sector.

“Diamond
Bank’s results before exceptional provisions have proved resilient in
the face of these challenging conditions, with the group continuing to
grow deposits at a sensible rate and with operating income holding up
well. However, our profits have been impacted by large one-off
provisions which we have provided for in accordance with the CBN’s
guidelines for the period,” he said.

Loss before Tax

While
the bank’s loss before tax was N12.4 billion, its after tax losses were
put at N8.2 billion during the period in review. Provision for losses
was valued at N24.7 billion, far above the N1 billion provisioned in
December 2008.

A
gross earning of N67.7 billion was also below 2008 records of N67.8
billion. But its net interest during the period rose by one per cent
from N25.6 billion to N25.8 billion year on year.

Also
commenting on the results, Uzoma Dozie, Executive Director, Corporate
Banking, said the drop in profitability was the significant rise in
provisions. “The challenge ahead is to reduce our NPL concentration and
to grow our risk assets in a slower growth environment than before,
while complying with our new risk management framework.

Access Bank too

Similarly,
Access Bank’s year end common results for December 31, 2009 showed a
loss before tax of N3.5 billion, even as it issued a bonus of one for
every 10 shares held.

Aigboje
Aig-Imoukhuede, the bank’s Chief Executive Officer, in a report made
available to NEXT, said the bank’s nine-month financial year “coincided
with a tumultuous period for the Nigerian banking sector, accounting
for the bank’s performance. Our earnings were impacted by the necessity
for large exceptional provisions which we were unable to absorb fully
in the nine-month period.

“Notwithstanding
the resulting net loss, we closed the year in a very strong financial
position, with levels of capital and liquidity far higher than required
by both local and global standards. We have made tremendous progress in
reducing our levels of classified loans and are confident that our
strengthened risk management framework will ensure earning resilience
to any future stress factors,” he added.

Gross earnings stood at N66.1 billion with exceptional provisions of N21.5 billion and recoveries at N14 billion.

Obeahon
Ohiweri, Executive Director, Commercial Banking, said the growth in the
bank’s gross earnings, combined with a reduction in its operating
expenses meant it delivered positive operating profitability in a year
marked by rising cost of funds and heightened credit risk.

“Our
one bank strategy helped us gain market share across geographies and as
our new branches began to gain momentum in 2009, collections of lower
cost deposits accelerated. We are also delighted that our efforts to
recover non-performing loans (NPLs) produced a significant improvement
in asset quality in the last quarter of 2009.”

Going forward

Ebenezer
Olufowose, Access Bank’s Executive Director, Investment Banking, noted
that despite the underwriting losses, “Going forward, we intend to
focus on the emerging opportunities in project and debt finance markets.

Victor
Etoukwu, General Manager, Retail Banking, said the bank will make
significant marketing investment in its savings products and card
services that should emerge as leaders in its extensive product range.

Diamond
Bank’s Mr. Onwuka, however, believes that all hope is not lost on the
bank. “We have taken substantive measures to improve our risk
management and this is borne out by a substantial reduction in our
provisions post year-end, and a return to profitability which is
reflected in our Quarter One (Q1) results.

The Katsina State Government has spent more than seven billion naira on agricultural development between 2007 and the present.

The state
commissioner for Agriculture and Natural Resources, Sani Fago, stated
this on Wednesday in Katsina at an interactive session with the Peer
Review team of the Nigeria Governors` Forum (NGF) Secretariat.

Mr. Fago said that
the money was spent on the procurement and distribution of fertiliser,
irrigation activities, livestock services, counterpart funding for
Fadama projects, seed production and the resuscitation of extension
service centres.

He said that it was
also used for forestry activities, the purchase of grains for buffer
stock, Agricultural Service Guarantee Scheme and the vaccination of
livestock.