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Egypt’s Arabiyya
Lel Estithmaraat investment firm said on Sunday it agreed to pay 320
million Egyptian pounds for a majority stake in the historic Omar
Effendi department store chain.

Egypt had sold the
chain to Saudi Arabia’s Anwal for 589.5 million Egyptian pounds in
2006. The sale attracted public attention in Egypt, where the media
have repeatedly accused the state of selling its assets too cheaply.

Arabiyya announced
the deal on Thursday, but had declined to say what it had agreed to pay
for the 85 percent stake. The firm’s shares, which soared 9.6 percent
after the announcement, were trading up 3 percent by 0929 GMT on Sunday.

An Egyptian member
of parliament had asked Egypt’s general prosecutor to stop the sale,
saying the state’s deal with Anwal restricted the resale of the chain’s
assets, Egypt’s state news website egynews.net reported on Sunday.

Orascom Telecom
must settle all its liabilities before Algeria will conclude a deal to
nationalise the Egyptian firm’s local mobile phone unit, Algerian Prime
Minister, Ahmed Ouyahia, said on Sunday.

Orascom Telecom has
reluctantly agreed to negotiate terms for the nationalisation of its
Djezzy unit and now wants the deal concluded as quickly as possible,
but the new conditions imposed by Algeria are likely to delay the
process.

Some analysts say
prolonged uncertainty over Djezzy – Orascom Telecom’s biggest source of
revenue – could jeopardise a $6.6 billion deal for Russia’s Vimpelcom
to acquire Orascom assets, creating the world’s fifth-biggest mobile
operator.

Angola wants OPEC
to raise the country’s oil output quota, as the southwest African
country depends on its natural resources for “social economic
recovery”, oil minister, Jose Botelho de Vasconcelos, said on Sunday.

Mr. de Vasconcelos,
who is in New Delhi to attend industry conference, Petrotech, said the
country was producing 1.8 million barrels per day, which is more than
its OPEC quota.

He said the country would like OPEC to raise its output quota, as oil significantly contributes to its growth.

Asked if he seeks a higher quota for his country, he said: “We are trying to do that…”

When Fitch Ratings,
one of the world’s better-known Credit Rating Agencies (CRAs), was
reported in the papers last week as having downgraded its outlook on
the Nigerian economy, my initial reaction was “So what?” A negative
credit warning should increase the price of the country’s sovereign
risk. But how to measure this in the absence of a sovereign debt
instrument?

Besides, the credit
rating function is the most damaged franchise to have come out of the
recent global crisis. Indeed, after Greece nearly succumbed to the
market’s panic over the sustainability of its near-term fiscal outlook,
and the deluge of sovereign rating downgrades that followed the
European sovereign debt crisis, the big question has been over the
accuracy of the CRAs’ credit risk assessments.

One of the most
important recent contributions to the debate over the continued
relevance of credit ratings, the IMF’s Global Financial Stability
Report (GFSR) for October 2010, finds the key strength of the CRAs in
their ability to “provide information, monitoring, and certification
services.”

This way, the CRAs
even out the information asymmetries between debt issuers and
investors, provide (through their rating downgrades) continuous
assessments of these securities, and because most countries insist on
credit ratings as part of most financial contracts, they also provide
an assurance function.

Consequently,
countries cannot readily and cheaply “access global capital markets and
attract foreign investment”, if they have not been rated first. Few
investors will touch fixed-income securities that do not have credit
ratings.

And it would seem
that the originate-to-distribute model of bank lending (which replaced
the traditional originate-and-hold variety, and which has been
described as complicit in the underestimation of risk that aggravated
the current financial crisis) could not have happened if the CRAs did
not start lending their imprimaturs to structured products.

Did these functions
also destabilise financial markets? How much of the impact of the
sovereign debt crisis in Europe was because holders of some countries
debt instruments felt pressured by adverse credit rating news in other
countries to demand stricter repayment covenants?

The IMF concludes
that “CRAs do have an impact on the funding costs of issuers and
consequently their actions can be a financial stability issue.”
Accordingly, the GFSR October 2010 recommends, amongst others, for
policy-makers to redouble efforts at reducing “their own reliance on
credit ratings, and wherever possible (removing) or (replacing)
references to ratings in laws and regulations, and in central bank
collateral policies.”

The Fund also
counselled regulators to strengthen their supervision of CRAs if they
had to use the latter’s ratings for their regulations.

Significantly, the
Fund also found that the informational value of sovereign ratings
occurs not through “actual rating changes,” but because of “outlooks”,
“reviews” and “watches”, which show the possible future trajectory “and
timing of future rating actions.”

On this count, the
response of the Nigerian authorities to Fitch’s review was risible.
Splitting hairs over whether this was a rating or an outlook downgrade
doesn’t quite make the grade. The point is that according to the IMF,
“CRAs use a negative ‘outlook’ notification to indicate the potential
for a downgrade within the next two years (one year in the case of
speculative-grade credits)”. And that between June 26, 1989 and March
31, 2010, the 212 negative outlooks published by one of the leading
CRAs were followed by 118 downgrades within an average of six months.

So, the possibility
of a rating downgrade is high, if over the near-term, government fails
to address the public expenditure management framework in a way that
significantly assuages public concerns.

For, it is not only
the rating agencies that are concerned at the rapid decline of the
country’s foreign reserves, even as demand pressure continues to mount
in the foreign exchange markets; or the country’s rising external debt,
in the face of constricting domestic capacity use. Government may be
persuaded of the usefulness of its planned reforms: proposed
establishment of a Sovereign Wealth Fund (SWF); and its intent to
address the infrastructure deficit in the power sector.

The truth, though,
is a wee bit different: in the absence of sustained and identifiable
welfare gains from government’s sundry activities, the electorate does
not care (nor can it subsist) on the ideas (for reform) that reside in
their leaders’ heads.

New Generation Telecommunications Consortium, winners of the bid for the Nigerian Telecommunications Limited (NITEL) and its subsidiary, MTEL, has given the assurance that it would pay the $750 million (about N112.5billion) bid security on or before the expiration of the deadline on Wednesday.

The consortium was issued a demand letter last week by the Bureau for Public Enterprises (BPE), to formally inform it of its emergence as the preferred bidder during the bid exercise held last February 16 in Abuja.

The letter, signed by Bolanle Onagoruwa, the director general of the Bureau, indicated that the consortium has 10 calendar days from the date the letter was issued to pay up, in accordance with the provisions of the Requests for Proposal (RFP) issued to all bidders at the inception of the process.

The payment of the bid security is a pre-condition for the issuance of the formal offer letter for the consortium to go ahead to complete the process to acquire the national carrier and its subsidiary.

Chukwuma Nwokoh, BPE spokesman, had, in a statement early last month, conveying the presidential approval to bring the transaction to a close, indicated that, “The balance of the bid amount of $1, 750 million should be paid within 60 days from the date of the issue of an offer letter.”

But, amid heightened anxiety over renewed attempt to end the delay in NITEL sale, which has suffered several failures since 2001, an official of the consortium said over the weekend that initial payment would be made before Thursday, despite the challenges they are facing.

“We are leaving no stone unturned to meet the 10 days deadline set by the Bureau for Public Enterprises (BPE), despite the long time it took the Federal Government to approve the transaction, and in spite of the recent happenings in the global financial market, which have exposed us to a lot of considerable pressure,” Usman Gumi, chief executive of the consortium, said on phone from Abuja.

Long negotiation

Kenneth Ugbechie, the executive secretary, Africa Telecom Development Initiative (ATDI), said yesterday that the expectation of the average Nigerian is for New Generation Consortium to make good its promise to meet the payment deadline.

“The transaction has dragged on for far too long, to the point that it has become an embarrassment to everyone, including the government itself.

“What most people are asking is for government to ensure that the old NITEL workers are paid off, so that the new owners can start on a clean slate; so that tomorrow, nobody can carry placards to the gates of the new owners protesting their unpaid benefits,” Mr. Ugbechie said.

The tone of things to come in the banking industry may have been set with the report at the weekend of the emergence of First City Monument Bank (FCMB) as the preferred strategic investor for Finbank.

Finbank, last Friday, sent notice to the Nigerian Stock Exchange that it was in negotiations with a potential strategic investor, but gave no further details.

Kenny Aliu, group head, corporate communications at FCMB, refused to confirm the bid.

“Once there is an official position on this matter, we will make it public. For now, we have nothing to say,” Mr. Aliu said.

Strong bids are also in the pipeline for Bank PHB and Union Bank. The three banks are among the nine banks rescued last year by the Central Bank of Nigeria (CBN), which has canvassed new core investors to acquire the bailed out institutions. The others – Afribank, Oceanic Bank, Spring Bank, and Intercontinental Bank – are expected to announce new investors in the weeks ahead.

Lamido Sanusi, CBN governor, said recently that among institutions that have indicated interest in acquiring the banks are two foreign banks, along with local banks and private equity firms in partnership with foreign banks.

This is coming, however, amid threats by some shareholder groups to challenge the propriety of the Central Bank to negotiate the sale of the banks without due process. Sunny Nwosu, coordinator of one of the shareholders group, said shareholders will fight the acquisition of Finbank by FCMB.

“Let the court decide. There have been advertorials alleging non-transparent and unprofessional bidding process by FCMB. If that is the case, it means the emergence is questionable. It should be subjected to interpretation and court adjudication,” Mr. Nwosu said.

However, Godwin Anono, another shareholder activist, said the takeover by FCMB was the best thing to happen to Finbank.

“I don’t think there is anything unprofessional about the way FCMB went about its bidding,” he said.

Other bids

Access Bank and Fidelity Bank are also bidding for Afribank. Austin Edoja-Peters, Access Bank spokesman, did not confirm his bank’s interest. He, however, said the bank will make bids in line with CBN regulation.

Emma Esinne, Fidelity Bank’s spokesman, affirmed the bank’s bid, saying, “We are interested in the bank in question. At the appropriate time, when it becomes necessary, we will make it open.”

But a source at Bank PHB said the bank has not had any bid from local banks.

“We have only received bids from Habib Bank Pakistan so far,” the source said.

Habib Bank Pakistan was a shareholder in Habib Bank Nigeria, which eventually merged with Platinum Bank to form Bank PHB.

Union Bank has also settled for one bidder, out of about a dozen bidders that indicated interest in acquiring the 93 year old bank.

“We narrowed it down to four and now we have zeroed in on one, and it is not a bank,” said Francis Barde, the bank’s spokesperson.

Asked to confirm speculation that African Capital Alliance, a private equity firm, was the preferred bidder, he declined.

“It will not be ideal to disclose at this stage. Until we conclude all negotiations and agree on the details, we cannot disclose,” Mr. Barde said.

Mrs. Shittu started trading as a young
girl and in 20 years had established herself as one of Nigeria’s
largest distributors of high quality household brands ranging from baby
food and diary products to instant noodles. She also became a large
investor in the blue chip companies for whom she distributed products
and built a substantial share portfolio.

Whilst she was an experienced trader
and investor, she was one of those Nigerians that saw the writing of a
will, or any estate planning for that matter, as taboo. When she died
of a heart attack at 67 years old, leaving a legacy valued at hundreds
of millions of naira, it took her seven children seven long years to
sort out her estate and gain access to just a part of it.

Many share certificates were lost as
neither the administrators nor the beneficiaries had full knowledge of
the totality of the shares involved. Over time, some companies had
merged with others or ceased to exist. They were unable to trace a
large number of share certificates and some dividend cheques appeared
to have been fraudulently cashed.

Many legal heirs get caught up in a
long drawn out and tedious process after the death of an investor. Due
to a general apathy shown towards investments, share certificates and
dividend warrants are often not given the appropriate attention during
an investor’s lifetime and usually end up being lost or difficult to
trace. Consequently, many legacies or bequests go unclaimed and
abandoned. This has contributed to, and continues to exacerbate the
already large incidence of unclaimed dividends in the Nigerian Capital
Market.

Transmission of shares

The process by which securities of a
deceased account holder are transferred to the account of his legal
heirs is referred to as “transmission”. The process is an involving one
that includes, but is not limited to:

Obtaining either probate or Letters of Administration, whichever is applicable.

Presenting physical share certificates
if they have not already been lodged in the central depository prior to
the investors demise.

Presenting a certified copy of the death certificate along with other documents required in support of the application.

If the deceased shareholder had
holdings in different companies, the relevant documents must be
forwarded to each of the company registrars.

Payment of estate taxes, which is 10 percent of total estate value to the government, and a transmission fee.

Obtaining bankers confirmation for the various registrars.

Here are a few things you can do now to
minimise the stress that your beneficiaries go through to gain
ownership of the shares that you intend to leave them.

Dematerialise your share certificates

The share transmission process becomes
most complex where the deceased held shares in physical form in his
sole name and died intestate. The process of transmission in the case
of dematerialised holdings is simpler and much quicker.

In the depository system, the shares
are already account balances in the electronic form and the successor
needs interact only with the stockbroker to whom he submits necessary
documents.

In case of physical securities, the
legal heirs or surviving joint holders have to independently correspond
with each company registrar in which securities are held, which can be
a long drawn out process.

Make a will

When one dies leaving a valid will that
specifies how an estate including shares, property, and cash in the
bank should be shared among beneficiaries, the transmission process is
fairly straightforward once probate has been granted.

A trust is also an ideal vehicle to
hold assets for proper management and a seamless transfer, particularly
when a substantial estate is involved.

Shares held jointly

Some people opt to include their
spouses or other family members as named joint shareholders. In the
case of a joint shareholding, the registrar, after verifying the
transmission form and other relevant documents submitted by the
surviving shareholders, will delete the deceased members name from the
register.

Consequently, the remaining
shareholder(s) will be recognised as registered holders. The process is
much more unwieldy where a deceased shares are held in a single name
only.

Other planning options

There are other planning options that simplify the transfer of assets to beneficiaries.

Some investors purchase shares in the
name of a company or have shares transferred to a company vehicle with
beneficiaries as shareholders of the company. Upon the demise of the
investor, the authorised signatories of the company can simply be
amended to reflect the beneficiaries.

Another option is to open a nominee
account and transfer all the shares to an account managed by an
experienced portfolio manager as a discretionary portfolio.

Do something about your shares in your
lifetime. The effect of not properly handling these assets can only
result in a painful and frustrating time for your loved ones, which you
can avoid.

Even where certificates cannot be traced, along with their request
for transmission of shares, legal heirs can apply for the issuance of
duplicate share certificates.

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.

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.

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.”