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Ecobank Nigeria Plc has refuted the claims of three customers
from its Ogoja branch in Cross River, stating that it did not collect any
deposits as claimed by the complainants, and as such is not liable to interest
payment as demanded.

The three customers of the bank, John Lukpata, Boniface Ugbem
and Okpe Idagu, had earlier accused the Ogoja branch management of the bank of
defrauding them bank of the interest accruing to the millions of naira fixed
deposit the lodged with the bank.

The customers, in their joint petition to the managing director
and chief executive of the bank, appealed to him to investigate their claims,
saying they had not been told the truth about the gain they made on their
deposits.

The claim

Specifically, the customers accused the Ogoja branch manager of
the bank, Michael Takim, of playing a fast one on them and have since taken
their case to the bank’s headquarters of the in Lagos for necessary action.

The counsel to the acclaimed defrauded customers, in his
petition entitled “Demand for the payment of our Deposit with your Bank”,
claimed that, acting on the “sound” financial advice of Mr. Takim, on the 18
August, 4 September and 3 October, the three customers lodged sums of money to
the tune of 11 million naira in various fixed deposit account with the branch.

The petitioners allege that, contrary to expressed terms of the
transactions as contained in the fixed deposit certificate issued them which
stated that the interest rate at maturity of the deposit was 14%, “no money was
paid to us at the maturity of the deposit”.

They consequently called on the managing director to take
immediate action considering the fact that, according to them, the delay in
paying them their deposits has caused them “undue pain and unnecessary
embarrassment”, with many of them forced into debt to meet their basic
obligation to their families.

The demands

The petitioners have thereby demanded the bank’s head office intervene
or risk the inquest of the Economic and Financial Crime Commission (EFCC) into
their allegation.

“In the circumstance, we hereby demand for the payment of our
deposit within fourteen (14) days falling which we shall process to seek other remedies
to recover our money without further notice,” they said, adding that, if the
agreed interest on their deposits is not paid by the bank, they will, beside
legal action, report the matter to the EFCC.

They emphasised that, if it was the other way round, the bank
would have since seized their assets and taken them to court for default.

Attempts to get the reaction of Mr. Takim to the allegations
were futile as he was said to have been summoned to the head office over an
undisclosed mission.

‘Not liable’

However, the bank, in its response to NEXT enquiries, said the
customers’ claim to have paid money into the bank is unfounded. “They do not
have payment slip to show in this regard, neither is there an acknowledgment in
the bank’s records that they had investments with the bank,” the bank’s
statement claimed.

According to the bank, the aggrieved customers went into a
private deal with the bank manager that flopped, and they were seeking ways to
rope the bank into the chaos, as means to recover their lost funds.

“Okpe Idagu, John Lukpata and Boniface Ugbem customers of
Ecobank Ogoja Branch entered into a private business deal with our former Ogoja
Branch Manager, Mr. Micheal Takim – that is to fund oil and gas business that
failed,” the statement further said.

The bank disclosed that the case has been reported to the police
in Calabar, who have since commenced investigation.

“Micheal Takim has made a statement to the police detailing the business
arrangements leading to the collection of monies from the complainants above,”
the bank concluded. “The bank did not collect any deposits from the
complainants and as such is not liable to interest payment as demanded.”

The continuous bullish trend being recorded at the Nigerian
Stock Exchange has been attributed to the positive macroeconomic performance
witnessed in the first quarter (1Q) of the year, equity research analysts at
Renaissance Capital have said.

The investment analysts, in a statement on Monday, said “Robust
macroeconomic performance in the first quarter of the year support equities’
gains.” They supported their claims with the figures reported by the Central
Bank of Nigeria (CBN), during last week’s meeting of the monetary policy
committee.

The CBN announced that macroeconomic performance in 1Q of 2010
was sound, with gross domestic product growing 6.7 per cent (up from 4.5 per
cent growth in 1Q09), inflation relatively constant at 12.3 per cent (as
against 12 per cent in the 4Q09), and the naira stable at about N150.43 per $1
on the interbank market.

Market forecast

Predicting market performance for this week, Renaissance
analysts said “This week, we are confident that equities remain the strongest
play on expected strong corporate earnings releases – particularly from
consumer and banking names – and we think investors would be well advised to
move out of fixed-income securities and into equities, in light of the
substantial depression in the yield curve.

“We are bullish on non-financials that have lagged the market in
the recent rally. We also favour those financial stocks for which we see a
build-up in demand: such as BCC, UACN Properties, Diamond Bank,” they added.

Meanwhile, Proshare Nigeria Limited, an investment advisory
firm, said it is expected that investors will continue to chase after the
stocks of companies that declared returns.

The company noted despite the bearish trend recorded in two
trading days during the past week, the stock market closed on a positive note.
The market at the end of the week recorded appreciations in three of the five
trading days. It said the sell pressure recorded in the two trading days could
be attributed to “investors’ besieging the market for profit taking” following
the six trading days appreciation earlier recorded.

However, Proshare said it would augur well for the market and
the investing public in general if all the quoted companies can declare their
financial results on time, “instead of unnecessary delay that keeps investors
in suspense.”

Gainers and losers

At the close of trading on Monday, Guinness Nigeria and Mobil
Oil Nigeria topped the price gainers’ table with an increase of N7.74 and N7.57
on their opening prices of N154.99 and N151.44 per share. Oando Oil and Julius
Berger Nigeria followed in the chart with an increase of N6.02 and N2.67, to close
at N126.53 and N56.14 per share.

Total Nigeria and African Petroleum led the price losers’ chart
with a loss of N8.28 and N2.29, to close at N185.87 and N45.10 per share. RT
Briscoe and Nigerian Breweries followed with a decrease of N1.34 and N1.28 on
their initial prices of N6.50 and N70.81 per share respectively.

Bears across the globe

Stock markets were bearish across the globe on Monday. The
Australian Securities Exchange’ ASX lost 1.36 per cent while the Hong Kong’
Hang Seng was down by 2.10 per cent. Also, the Canadian TSX 60 Index and
Japanese Nikkei 225 recorded 0.52 per cent and 1.74 per cent depreciation,
respectively.

In Europe, the Germany DAX Index lost 0.12 per cent while the
Europe Euronext 100 Index and the France CAC 40 Index lost 0.50 per cent and
0.42 per cent. The Switzerland Market Index also decreased by 1.28 per cent.

Back in the Age of
Innocence, 2008 to be precise, after my one millionth sighting of the
ubiquitous ‘Change We Can Believe In’ on car bumper stickers, t-shirts
and banner ads on the web, that motivational slogan tripped over to the
land of cheesiness and corniness. It became a victim of its own
success.

It was one thing to
be moved by the empathetic oratory of Barack Obama but quite another to
see its commoditisation. For me, it was all too much of a good thing to
see all those emblazoned mugs, flags and tie pins when walking down the
street. It gave ‘pedestrian’ a whole new meaning. At that point, all I
could think of was ‘Change You Had Better Deliver or Else.’ Maybe it is
still early days to judge the Obama presidency, but after the Messianic
undertones that marked the last months of his campaign, even the real
Jesus Christ will have a tough time living up to the outsized
expectations.

Sense of purpose

Two years later, I
once again find myself secretly hoping for another Believer’s High.
Maybe I am getting soft with age, but one would need a microbetight
inspiration-immune system to finish reading Arunma Oteh’s Financial
Times interview without being impressed by the director-general of the
Securities & Exchange Commission’s sense of purpose. Halfway
through the interview, I found myself nodding with approval. I thought
that, at last, here is someone who knows what the matter is and
appreciates what needs to be done. No doubt, she has her work cut out
for her. When things are broken, it does not require blinding insight
to tell what needs fixing. Actually, there is nothing extraordinary in
Ms. Oteh’s identification of the problems and proffered solutions.

No, what impressed
me was her style. She was tactful without being cagey and subtle
without being ambiguous. As the market regulator, she knows the impact
her words can have and weighed each one carefully. Populist blurting is
not her thing. In comparison to her opposite number at another
regulatory hegemon, the SEG D-G is a study in opposites. While she
obviously shares Lamido Sanusi, the Central Bank governor’s, zeal for
sanitising the financial services sector, she has none of the ‘my way
or the high way’ unilateralism that seems to characterise her peer’s
utterances, admirable as his intentions might be.

Grandstanding and showmanship

Ms. Oteh’s quiet
way of going about her job has won me over. Forget the grandstanding.
Trash the showmanship. The lady has work to do and she clearly prefers
to beaver away far from the limelight. Here again, the contrast with
Lamido Sanusi comes to the fore. While the Central Bank governor, in
spite of his best efforts, seems to have become identified with the
dreaded role of The Enforcer, Ms. Oteh has side-stepped the terrifying
Labour Prefect label.

But are words
enough? Will Ms. Oteh deliver the goods? At the end of the day, that is
what it will come down to and not her fine words. Not even her
‘twenty-two years spent building a global reputation’ will pave a royal
road for her. To scale the mountain before her, the former Group
Treasurer of the African Development Bank (ADB) will require more than
intellectual competence and administrative pedigree. She, more than
anyone else, should know that the task before her is as much technical
as it is political. The barons of the ancien regime will not just stand
back and watch her hack away at the status quo. They will cajole,
threaten, resist and fight back. Too much, too soon will dissipate her
strength, and too little, too late, will steal her momentum. This
general must pick her battles carefully.

Her assumption that
the SEC is the apex regulator and should enjoy deference, as a matter
of course, will be put to the test. The market miscreants will need to
see more than her badge to surrender.

Action, not words

I find some comfort
in her past statements that action, not words, will lead Africa out of
the abyss. In the Preface of African Voices, African Visions (2004),
which she co-edited with Olugbenga Adesida, the Harvard MBA holder does
not hide her impatience for the soporific swings between analysis
paralysis and analysis lacunae that plagued commentators over
structural adjustment programs (SAP) in Africa:

‘While we were
reacting to the international financial institutions no one was really
busy trying to map out a future for the continent or design alternative
strategies to transform Africa. . . Our fear about the future is not
just that Africa is facing tremendous challenges on almost all fronts.
Africa can overcome these, as others have overcome similar handicaps.
Our fear is centred simply on the lack of new and innovative ideas.
This is the danger: the poverty of ideas and of the mind. Because it is
only with ideas that we can dissolve the multiple crises facing
Africa.’

Sweet talker or
action woman? We will soon find out. I desperately wish that the D-G
has the steely resolve to say, just like Margaret Thatcher, that other
Iron Lady: ‘to those waiting with bated breath for that favourite media
catchphrase, the U-turn, I have only one thing to say. “You turn if you
want to. The lady’s not for turning.”’

Ms. Oteh, straight!

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

The board of the Central Bank of Nigeria (CBN) on Friday rolled
out guidelines to regulate the operations and activities of banks relating to
granting of loans to investors trading in stocks in the nation’s capital
market.

The bank’s governor, Sanusi Lamido Sanusi, who was briefing
journalists on the resolutions of both the 69th Special Monetary Policy
Committee (MPC) meeting and the board of the bank, said that henceforth, bank
shares are no longer eligible for financing with margin loans.

Mr. Sanusi recalled the recent crisis in the nation’s capital
market, attributing the unprecedented decline in the share prices of most of
the banks’ shares and the resultant severe liquidity problems and shocks in
most banks to the huge losses by investors as a result of the loans collected
from various banks, stock broking firms, capital market dealers.

Loss of capital

Recently, he had attributed the loss of over 66 percent of
capital by the nation’s banking system between December 2008 and December 2009
to the reckless deployment of depositors’ funds by banks, including loans to
customers for investments in bank shares in the capital market in anticipation
of a windfall.

To forestall the recurrence of the crisis, particularly
concerning banks that were exposed to investments in the capital market and
energy sector, he said the apex bank’s Financial Services Regulation
Coordination Committee (FSRCC) resolved to adopt these guidelines to regulate
operations and activities relating to lending, specifically for trading in
stocks in the capital market.

The guidelines to regulate margin lending by banks and stock
brokers, he said, cover provisions for the minimum margin for all such loans,
eligibility rules for all operators, certification for banks and stock brokers
qualified to handle margin loans as well as shares eligibility.

According to the CBN boss, the approved guidelines are subject
to approval by the board of the Securities and Exchange Commission (SEC),
pointing out that, when approved in the next one week, the new regulation would
be jointly issued by the two regulatory institutions.

SME Credit Guarantee
Scheme

Other decisions of the Board, he said, include the establishment
of a N200billion Small and Medium Enterprises (SME) Credit Guarantee Scheme, to
promote access to credit by manufacturers and SMEs in the country.

The scheme, to be funded 100 percent by the CBN, is designed to
unlock the credit market in the country to complement the N500billion Energy
SME Fund recently established to facilitate the development of the infrastructure
in the nation’s power sector.

According to Mr. Sanusi, the primary objectives of the scheme
include the need to fast-track development of the SME manufacturing sector of
the nation’s economy as well as facilitate access to credit by providing full
guarantees to prospective beneficiaries, set the pace for industrialisation of
the nation’s economy, increase access to credit by promoters of SMEs and
manufacturers, as well as create employment opportunities.

Activities to be covered under the scheme include manufacturing,
agricultural value chain, SMEs with assets not exceeding N300 million and with
staff strength of between 11 to 300, as well as processing, packaging and
distribution of primary products.

Private educational institutions are also listed as potential
beneficiaries of the scheme in line with the apex bank’s commitment to human
capital development “The maximum amount to be guaranteed under the scheme will
be N100 million per obligor, which can be in the form of working capital, term
loan for refurbishment, equipment upgrade, expansion and overdraft, while the
guarantee of the facility shall cover 80 percent of the outstanding amount in
event of default, and shall be valid up to the maturity date of the loan, with
a maximum tenor of five years,” he said.

Injecting N500 billion

On the resolutions of the MPC, he said members considered
modalities for the injection of N500 billion into the real economy, pointing
out that, though economic reforms and human capital development remain key
ingredients for economic growth, the CBN would continue to focus on
macroeconomic and financial stability considering its strategic role in
achieving sustainable economic growth.

“The key concerns remain the speed and sustainability of the
recovery process, which is progressing at varying degrees across the different
regions,” he said. “The recovery in the advanced economies is still weak with
real output projected to remain below its pre-crisis level until late 2011.”

Whether you are
just starting out in your career, saving for your children’s education,
a new home, or approaching retirement, investing in bonds can help you
achieve your objectives.

“My name is Bond”

When you purchase a
bond, you are lending an amount of money to a company, a state or
federal government or other issuer for a set period of time. In return,
you are guaranteed a fixed income, a coupon, payable in two equal,
semi-annual instalments. The borrower also agrees to repay the face
value or principal of the bond when it matures.

For example, if you
invest a face value of N1,000,000 in a five year bond paying a coupon
rate of 10% per year, assuming you hold the bond to maturity, you will
receive ten coupon payments of N50,000 each, a total of N500,000. At
maturity, the issuer will pay you back your N1,000,000 face value.

Diversification

To reduce the risk
that any one asset-class may pose to an overall portfolio, it is
recommended that investors maintain a diversified investment portfolio
consisting of bonds, stocks and cash, depending upon the investor’s
particular circumstances and objectives. Bonds play an important role
in a well-balanced portfolio and it makes sense to include them in your
portfolio.

Bonds are issued in
a range of tenors, from short term issues with one to five year
maturities, to medium term of five to ten years, and over ten years for
long term bonds. One may opt to “ladder” your bonds, buying several
with staggered maturity dates timed for when a cash need arises for
say, children’s education or retirement.

Bonds offer flexibility

Although bonds are
issued for a specified period of time, investors do not have to keep
the bond until maturity. An investor may need cash for some purpose or
interest rates may have risen since the bond was issued. Indeed “call”
and “put” provisions make it possible for investors to buy and sell
them ahead of maturity, trading them like shares.

Individual Bonds versus Bond Funds

As an investor you
can choose between investing directly in a bond or in a bond mutual
fund. The main advantage of a bond mutual fund is its convenience. A
professional fund manager will usually make better investment choices
than the average individual investor. In addition, a bond fund offers
liquidity, competitive yields, and diversification across a range of
bonds including government and corporate bonds, euro bonds and money
market instruments. For smaller investors, a fund provides an
opportunity to invest, as individual bonds are usually sold with
minimum volumes.

Bonds and Risk

Even though they
offer reliable fixed income, bonds are not risk free. When you invest
in bonds, you face three risks, the risk of default, inflation, and of
interest rate fluctuations.

Default risk is the
chance that the issuer, be it a government or a corporation, will be
unable to repay your money. Bonds offer a wide range in choice from the
very safe Federal Government Bonds with an AAA rating, which are
virtually risk-free as they are backed by the full faith and credit of
the Federal Government, to corporate bonds.

Rating agencies,
such as Agusto & Co, Fitch and Moody’s assign ratings to bonds, are
based on in-depth analysis of the issuer’s financial condition and
management, as well as other criteria. Such ratings, which are
periodically reviewed, help to give investors an idea of how likely it
is that a payment default will occur. As risk and reward go hand in
hand, an investor that has an appetite for greater risk might select
high yield bonds for the ensuing higher returns.

The value of a bond
fluctuates with changes in market interest rates. When interest rates
fall, bond prices rise, and when interest rates go up, the prices of
bonds go down. If you are holding a bond issued at 6% and interest
rates increase to 8% on comparable, newly issued bonds, your bond
decreases in value, as there would be no incentive for anyone to buy
your bond at the price you paid. As with all fixed income securities,
inflation is a major risk as it erodes the purchasing power of future
coupon payments.

Are bonds for you?

If you are looking
for income rather than growth but need a better return than you get
from cash, then government or corporate bonds are a good option. Even
though stocks usually provide a higher return over the long-term, high
quality bonds, will offer safety and stability. This is particularly
useful for investors who have a relatively short time frame within
which to invest including those approaching retirement and whose
priority is for a predictable stream of income to meet living expenses
and the preservation of their principal.

There is no hard
and fast rule about how much to invest and which bonds to invest in.
Your needs and goals change over your life cycle reflecting your age,
your investment objectives, your investment horizon and your risk
tolerance level. Whether you are just starting out in your career,
saving for your children’s education, for a new home, or approaching
retirement, investing in bonds can help you achieve your objectives.
Visit a primary dealer, your broker or investment advisor who will help
you select a bond that best suits your needs.

Write to
personalfinance@234next.com with your questions and comments. We would
love to hear from you. All letters will be considered for publication,
and if selected, may be edited.

Dearth of
infrastructure to aid manufacturing processes has been identified as
the major challenge facing the anticipated revival of the textile
industry.
Jubril Matins-Kuye,
the new minister of Commerce and Industry, announced during the week
that inadequate infrastructure is one of the reasons the federal
government is planning to suspend the disbursement of the N100 billion
textile bailout promised operators to revive the industry.
The minister
specifically cited Nigeria’s poor power supply situation as well as
trade barriers, which make indigenous textiles uncompetitive in the
markets, local or international.
He argued that some
basic infrastructure, especially power, ought to be in place before the
funds can be disbursed, adding that otherwise, the money will go down
the drain without achieving the purpose for which it was meant.
With regard to
trade barriers, he said, “the country is burdened by numerous trade
obstacles and we promise to ease trade barriers in the country’s
textile industry within the next few months.”
Lack of seriousness
But industry
operators are not happy with the development, saying that this just
goes to demonstrate government’s lack of seriousness with the bailout
plans, initiated in 2007, of which only N10 billion has so far been
disbursed. The N10billion was given to United Textile MIlls Limited
(UNTL) in January.
In view of the
amount so far disbursed and Mr. Matins-Kuye’s excuses for discontinuing
with the bailout, operators argue that government was never serious in
saving the industry in the first place.
Contrary to what
the minister said, textile manufacturers said their major challenge is
the scarcity of fuel oil (low pour fuel oil commonly called black oil)
to power their machines.
In the last three
years, government has constantly made a show over the bailout for the
textile industry, which has suffered serious economic crises, which saw
125 companies closing shops and the loss of over 200,000 jobs, in a
sector which used to be the prime employer of labour.
Criticising this
decision to suspend the bailout, Jaiyeola Olanrewaju, the Director
General of the Nigerian Textile Manufacturers Association, argued that
this will further hamper development and fresh investments in the
sector.
Mr. Olarenwaju said
any change of the goal post in the middle of the game not only confuses
the players but also underscores policy inconsistency in Nigeria.
“If there will be a
change in policy, one will expect the minister to dialogue with the
operators. The association feels that the minister has not been
properly briefed and merely expressed his personal views on the
matter,” he argued.
Sadiq Kassim, an
industrialist and former employee in the sector, noted that with the
anticipated bailout, “most of the textile companies operating in Lagos
are on the gas belt and had started converting the processes to the use
of gas to generate power. So, as far as power is concerned, it should
not be used as an excuse to fail.”
Suspension may be the right step
However, industry
watchers believe the suspension of the bailout might be the right thing
to do, in view of the lack of infrastructure to support substantial
manufacturing activities.
Taiwo Aladelola, an
economist argued, “Giving out funds in the present environment will
only add more stress on the loan utilisation, as most of the funds will
be used to ensure a viable operating condition. This will mean spending
most of the money on production and powering of machines. They
(manufacturers) will at the end of the day realise they can’t produce
nor compete effectively with the imported textiles.”
He also noted that
if government is sincere about finding a lasting solution to the
problem of infrastructure in the country, then it will deploy more
funds to tackle effectively.
Unfavourable operating conditions
For decades, the
texttile industry has been battling with unfavourable operating
conditions, now leaving just a few operatiors still hanging on.
Mr. Aladelola noted
that the removal of trade restrictions will not solve the problems
facing the sector but will lead to a further neglect and decay of the
industry.
“Allowing more
competition is not what is needed for the country right now, as this
was part of what killed the industry in the first place. What is needed
is the development of the manufacturing sector and the economy at large
through finding lasting solutions to the problems of power,
transportation, and funding,” he said.

Nigeria’s Excess
crude account earned the first accrual since the beginning of the year,
with the transfer of about N108.2billion by the Federation Accounts
Allocation Committee (FAAC).

The account was
depleted from over $8.4billion late last year to less than $3.2billion
in February, following withdrawals to augment the budget of the various
tiers of government.

The committee made
up of representatives of the 36 states of the federation and the
Federal Capital Territory as well as government revenue agencies
including the Revenue Mobilisation, Allocation and Fiscal Commission,
Federal Inland Revenue Service, Central Bank of Nigeria, and Nigeria
Customs Service, said transferred were made into the Petroleum Profit
Tax Accounts.

NEXT gathered on
Friday that the Committee shared a total of N284.592 billion among the
three tiers of government from revenues realised in the Federation
Account for the month of March 2010.

Revenue increase

Minister of State
for Finance and FAAC Chairman, Remi Babalola, said at the end of the
committee’s meeting in Uyo, the Akwa Ibom State capital, that the
distributed revenue was an increase of N11.352 billion or 4.16 percent
when compared to the N273.239 billion shared in the preceding month.

“The distributable
Statutory revenue for the month is N235.493 billion (based on exchange
rate of N125 to the dollar), shows an increase of N6.834 billion, or
2.99 percent compared to that of February 2010.

“The increase was
attributable to increase in the volume of import as well as higher
prices of crude in the international market within the period. The
total revenue distributable for the month (including value Added Tax)
is N284.592 billion but excludes augmentation and exchange difference
which were not distributed as 2010 budget is yet to be approved,” Mr.
Babalola said

According to the
Minister, the country earned a total of N436.953 billion during the
month of March, made up of mineral and non-mineral revenue of N385.809
billion and Value Added Tax (VAT) of N51.144 billion.

This, he said,
represents an increase of N48.856 billion when compared to the mineral
and non-mineral revenue of N336.953 billion in February 2010, and also
a rise of N4.707 billion over the VAT of N46.437 billion in February.

Of the total
revenue collected into the Federation Account, the minister disclosed
that N108.226 billion was transferred to the Excess Crude, Petroleum
Profit tax (PPT) and Royalties Accounts, representing an increase of
N45.591 billion when compared to the N62.635 billion transferred in
February.

Breakdown of allocation

A breakdown of the
distribution of the Statutory Allocation, according to the Accountant
General of the Federation (AGF), Ibrahim Dankwambo, shows that the
Federal Government received the lion’s share of N112.427 billion (about
52.68 percent), as against the N108.756 billion received in the
preceding month.

The 36 States
received N57.025 billion (26.72 percent) of the statutory allocation,
an increase of N1.862 billion when compared to the N55.163 billion paid
in February 2010, while the Local Governments’ statutory allocation
amounted to N43.964 billion (20.60 percent) as against the N42.528
billion received in the preceding month.

The 13 percent
derivation for oil producing states accounted for the balance of the
statutory allocation of N22.077 billion, which was distributed among
the nine oil producing states.

Mr. Dankwambo also
explained that the states got the largest disbursement from the five
per cent VAT of N24.549 billion (50 percent), an increase of N2.259
billion over the amount shared in February.

The Federal
Government’s share of the VAT allocation was N7.365 billion (15
percent) while the Local Governments got N17.185 billion (35 percent).

The
Central Bank of Nigeria’s (CBN) governor, Sanusi Lamido Sanusi, has
said that unaddressed economic problems are contributing to long-term
inflationary pressures.

He
made this statement on Friday at the end of the 69th Special Monetary
Policy Committee(MPC) Meeting in Abuja. He also said that inflation is
being exacerbated by the huge recurrent expenditure component in the
2010 budget, even as year-on-year headline inflation was announced to
have risen from 12 percent in the last quarter of 2009, to stabilize at
12.3 percent at the beginning of this year.

He
called for speedier government spending to address problems such as
bank lending and an adequate power supply, the absence of which means
greater costs to producers and higher prices for consumers.

“We
have a stimulus budget that is not signed. That budget has a very large
component that is recurrent expenditure, as opposed to capital
(appropriation). If we do not make progress in unlocking the structural
bottlenecks in the economy, by taking steps to address the five key
issues required to get the economy growing, we will end up with a high
risk of structural inflation,” Mr. Sanusi warned.

He
listed the five key issues necessary to attaining economic growth as
monetary and financial sector stability; development in key
infrastructure; investment in human capital development; as well as
price incentives to help boosts investment.

Price incentives

According
to him, price incentives come when one is talking about issues like
deregulation of the supply of petroleum products and the services in
the power sector, expressing regrets that at the moment “all these
issues have not moved as fast as they should.”

“If
these were to be so, the nation would get investments into those key
sectors. These are the things that would unlock the supply bottlenecks
in the economy and allow the system to flourish. Throwing monies into
recurrent expenditure will ultimately end up impacting negatively on
the level of inflation in the system, by either pushing up the prices
of domestic goods and services, or exerting pressures on the exchange
rate regime, and having the nation importing inflation into the economy.

“So,
to the extent that there is progress in the development of the power
sector and the infrastructure, these risks would get mitigated. But, if
we keep spending money without addressing those fundamental structural
issues, the nation will end up with a high risk of structural
inflation,” the CBN boss argued.

Core
inflation was said to have stabilised at 10.1 percent last January and
February, up from 9.7 percent recorded in the last quarter of last
year, with stability in the domestic price level attributed to the
continuing monetary contraction, continued delay in the passage of the
2010 federal budget, and the improvement in the supply of petroleum
products.

But,
according to the MPC, notwithstanding these developments, the threat of
inflationary pressure in the near-to-medium term remains real, and a
major challenge to government’s effort to create an enabling
environment for sustainable economic growth and employment.

On
efforts to stem systemic risks aimed at facilitating the process to set
the nation’s economy on the path of sustained recovery, Mr. Sanusi said
apart from ongoing discussions to review the universal banking model,
the CBN is asking for additional legal empowerment to intervene in the
operations of institutions not under its regulatory authority, but
whose activities are considered a threat to the financial system’s
stability.

“We
have discovered that banks are a major source of systemic risks, as a
result of their deploying huge depositors’ funds to risky activities
that are not in line with core banking business. The draft law is being
discussed with the banks and other stakeholders, and would be
fine-tuned for the Board of the CBN to give a final approval during its
meeting in May, after which the banks would be given between 18 and 24
months timeframe to migrate to the new model,” he said.

Global disconnect

Central
Banks around the world, he pointed out, have since realised the
disconnect between the tools available to the banks and the roles
assigned to them, adding that as lender of last resort, the apex bank
has the ultimate responsibility for the financial system stability.

Arguing
that the role of the CBN goes beyond being regulators, he cited the
experience in some countries like Malaysia, where their Central Bank
has been empowered to intervene in institutions they are not
regulating, if their activities have become a threat to the financial
system’s stability.

“We
are going to have discussions with other regulators to define exactly
what role the CBN has to play in dealing with institutions that can
pose a potential risk to the nation’s financial system’s stability,
even if they are not directly under the supervision of the CBN. We are
part of the global discussion on the regulatory architecture that is to
be put in place to mitigate the impact of systemic risks. This is part
of what is before the National Assembly’s agenda for the reform of the
nation’s banking sector,” he said.

Much
myth currently attends the practice of banking in the country. A lot of
it is understandably negative. Much of it acknowledges, and derives
from the critical roles banks are supposed to play (but apparently do
not here) in allocating financial resources within an economy. This
folklore explains the focus for a long time on the relationship between
banks’ alleged greed, and high domestic interest rates. Banks,
according to this narrative are in breach of their responsibilities to
the domestic economy each time lending rates reach “too high”. Then,
the real and extractive sectors will no longer be able to access the
credit without which they cannot meet their customers’ current needs or
grow their businesses. Domestic output growth thus suffers, and we are
all the worse for it. Consequently, the last two governments at the
national level have spent inordinate time absorbed by the challenge of
driving interest rates down.

The
error in this regard lies in the failure to accept interest rates as a
price, subject as with all prices to the push and pull of demand and
supply. And because the possibility of a market without distortions
exists only in the fevered imagination of the purists, not even the
price of money is spared the premiums and discounts that arise from the
improper workings of the money market. Rather than try by fiat to keep
interest rates down, a more useful response would have seen government
address the structural ~ impediments to the supply of funds to the
money market, or the hurdles in the way of growth in the domestic
demand for credit.

Misunderstanding the market

A
different misunderstanding of the market for long-term funds lies at
the heart of the more popular recent myth about the banking industry:
its supposed reluctance to lend for long-term investment. The main
sub-narrative here is the one that describes the nation’s banks as
unduly excited by near-term results, and consequently willing to lend
to distributors of fast moving consumer goods and importers of
consumables. The particular response of the domestic banking industry
to the second round effects of the global financial crisis has
exacerbated this opinion. Yet, one of the central lessons from the
crisis is that banks are best served by focussing on low cost deposits,
and credit creation, while leaving the much riskier investment banking
operations to dedicated boutiques.

If
this reading of the crisis is correct, there is something perverse
about requiring banks reliant on short-term deposits to drive long-term
investments in the economy. A much more useful procedure would be the
creation of a market for long-term investible funds: thriving bond and
new issues markets. Prospects for the latter will await a proper
response by the responsible regulators to the price bubble that
inflated on the exchange during the last boom. However, as regards the
market for corporate bonds, the markets’ response to government’s
recent policy interventions (granting tax-exempt status to bond
holdings, and creating a secondary market for such bonds by allowing
banks to include them for computing their liquidity position) shows
clearly the need for changes in the macroeconomic policy environment,
including structural reforms that remove the volatility that the market
prices into financial assets.

Economic illiterates

This
volatility, the result largely of economic illiterates determining
official policy, has left investors in the domestic economy with a
short-term horizon. It also explains the pricing of loan deals. High
and unpredictable inflation rates, along with the likelihood of
significant policy reversals means that most banks in the country can
only offer adjustable rate loans. With bank loans, therefore, companies
face an interest rates risk, which they can only hedge against at some
added expense. Besides, corporate borrowers face other concerns when
accessing bank loans. Most banks have a large exposure limit, capping
the proportion of their shareholders’ funds that they can legitimately
lend to a single borrower. Large borrowers must thus look for
syndication to meet their lending needs. Add to these, the cost to
borrowing companies of the “loan covenants” that are attached to bank
credit, and the financing needs of corporate Nigeria is best met
through the issue of bonds, and not through bank lending.

Long-term
fixed rate instruments simplify the budgeting process, and permit a
focus on the long-term. Would-be borrowers would however require some
form of rating from a recognised agency, and a sound investor relations
framework. This is the next reform level.

Market overview

There is clearly an
increased interest in investing in the stock market. Last week, the
market attracted mixed sentiments. The market opened the week upbeat,
cheered by investors pouring in money on shares, as the market is
attractively placed in terms of liquidity of stocks, expected
profitability, positive earnings of companies and depth of the stock
market. At the close of trade on Monday, the market closed higher,
taking cues from the gains recorded in the previous weeks.
However, selling
pressure was witnessed on Tuesday and Wednesday and as profit booking
intensified, the indices failed to sustain momentum and started
drifting lower.

Nonetheless, as share prices start to overheat during
the bull run, profit-taking cycles provided an opportunity to pick up
shares on the dip. The profit-taking created by selling pressure on
blue chips created buying opportunities on the lower cap shares. The
market turned around on the fourth day (Thursday), gaining 0.31%. The
bull session continued till Friday during which the market
capitalization closed the week at N6.77 trillion.
Creditably,
investors have continued to take position in shares of companies that
have robust cash flow and less dependence on bank credit. Largely,
market rebounds have been attributed to trading activities in these
various sub-sectors- food and beverage, building materials, insurance
and stable banks.

The capital gain derived from investments in these
sub-sectors and many more has continued to sustain investors drive in
the market.
Going forward,
there are expectation that the stock market will maintain upward trend
in the weeks ahead if the rising investors’ confidence and earnings
from the quoted companies are sustained coupled with the recently
passed bill by the National Assembly for the establishment of Assets
Management Company (AMC) which expected to take off and buy out the
toxic assets of the rescued banks. Also, Strong fundamentals of blue
chips stocks are poised to attract more institutional and retail
investors in the weeks ahead. Therefore we tend to think that the rise
in stock markets is not purely a speculative phenomenon, but is also
backed by fundamentals. We strongly believe that the diversified income
base and improved socio-economic scenario will help in keeping the
stock market upbeat for an extended period of time.
During the week,
the NSE AS Index rose by 288.60 points or 2.69% to close at 27,988.71
basis points. The market witnessed a dip, resulting in depreciation in
turnover volume and value of shares traded during the week. Both the
volume and value depreciated by 4.29% and 27.46% respectively. By
Thursday, the market had gone back to its upward movement with the
market capitalization adding N69.80 billion to close the week higher
N6.77 trillion. See 1 and 2

Most Active Sector

The Banking sub
-sector remain the most active (measured in terms of traded volume) as
it recorded 1.04 billion shares valued at N11.72 billion exchanged in
22,230 deals while the Insurance sub -sector was second with traded
volume of 1.20 billion shares valued at N1.10 billion.

Gainers and Losers

During the week, 65
stocks appreciated in price, while 37 stocks depreciated in price.
Below are the tables showing top 10 gainers and losers for the week .
See table 3 and 4
Corporate actions and results
Oando Plc released
its full year trading result to the floor of the Nigerian Stock
Exchange in the past week. The company, which has 905,084,628 units of
shares outstanding, declared a Turnover of N336.859 billion and a
Profit after Tax of N10.096 billion. The Directors are recommending a
dividend of N3.00 and a bonus of 1 for 2 units of shares held.
In the same vein,
Julius Berger audited financial report for the year ended 31 December,
2009 was also released on the floor of NSE today. The Directors
proposed final dividend of N2.40 per share. Closure date is 25 June,
2010 and payment date is 8 July, 2010.

Market outlook

The current trend
will be sustained in view of liquidity of stocks, expected
profitability, positive earnings of companies and depth of the stock
market. The attractiveness of the market which stems mostly from the
liquidity in the stocks will prevail on investors to focus on certain
sub-sectors amongst which are building materials, food and beverage,
conglomerates, banking, and insurance in view of its profitable core
business.