Nigeria Content Online

Some finance experts have said that the Central Bank’s decision
to hike the Monetary Policy Rate may be a positive signal for exchange rate
stability, even as the naira continues its gradual decline in value.

The naira fell to a 13-month low of 155.20 to the dollar on
Monday, from 154.35 on Friday at the interbank market, as demand surged to a
new year-high at the official bi-weekly auction, a Reuters report said on
Monday.

The Central Bank sold $650 million at 150.05 a dollar at
Monday’s auction, short of $741 million demanded. The CBN had sold $400 million
at 149.89 per dollar at last Wednesday’s forex auction.

“Many importers have resorted to panic buying of dollars and are
bringing forward their obligations because of fear the naira could depreciate
further,” the report said, adding that dealers say the market had become tight
due to lack of dollar inflows from energy companies as anticipated last week.

The report further said that the bank had raised supply from its
usual $400 million to $650 million at its bi-weekly auction on Monday, with the
hope of clearing the backlog of demand, only to be faced with a fresh increase
in corporate demand, which further weakened the local currency, with traders
saying the naira could depreciate further in the week if strong dollar demand
persisted and the Central Bank was not able to provide support.

Positive signal

Samir Gadio, emerging markets strategist, Standard Chartered
Bank, said the weak naira confidence has been the result of substantially low
interest rates.

“We see this development as a positive signal in terms of
exchange rate stability,” Mr. Gadio said.

“Weak naira confidence has been the result of substantially low
interest rates. By raising real interest rates, the Central Bank is sending a
signal to the market that it will rely on the exchange rate as the nominal
policy anchor and will be keen on preserving the USD/NGN150 level, despite some
recent cyclical, rather than structural, currency weakness.

“Nevertheless, we think the main risk to the foreign exchange
outlook is the government’s loose fiscal stance. In other words, if the next
administration pursues the current countercyclical fiscal policies after the
2011 elections, there could be an incentive to devalue the exchange rate and
boost the marginal utility of every dollar of oil revenue in naira terms,” Mr.
Gadio said.

Last week, the Central Bank of Nigeria (CBN)’s Monetary Policy
Committee decided to hike the MPR by 6.25 percent and increase the standing
deposit facility to 3.25 percent, from 1 percent, in contrast with market
expectations.

The committee also noted that the Whole Dutch Action System
(WDAS), interbank and Bureau de change (BDC) segments of the foreign exchange
market all witnessed “mild” naira exchange rate depreciation, but stated that
it believes that the relative stability in the foreign exchange market was
likely to be sustained in the near term.

A finance expert has expressed concern over the current weak
trading being experienced at the Nigerian Stock Exchange (NSE).

Although the NSE market capitalisation on Tuesday appreciated by
N5 billion or 0.10 percent to close at N5.495 trillion from Monday’s figure of
N5.490 trillion, the Exchange has lost over N451 billion since trading started
this month.

Olufemi Awoyemi, managing director and chief executive officer
of Proshare Nigeria Limited, an investment advisory firm, said the downturn in
the Nigerian capital market was not about the intervention by the Securities
and Exchange Commission (SEC), as claimed by some operators.

Mr. Awoyemi said the downturn in the market was also less about
the recent actions of the interim administrator, Emmanuel Ikazoboh, “but much
more about the collective inertia of the market to forward warnings on intended
action by the regulator.”

Volatile market

He said the market will continue to be volatile and chaotic. “It
will be volatile because it is tied to the economy’s rate of change, which is
extremely fast, with explosive upsurges and sudden downturns,” he said, adding
that the market will be “chaotic because it mimics the direction of the
economy’s changes.”

Mr. Awoyemi added that the nation is not sure exactly where it
is headed, but it is swinging between the various alternatives at a very high
speed.

“To cope with an unpredictable and increasingly regulatory
relevant economy, investors and organisations must build an enormous amount of
flexibility into their operations and outlook; rebuild their approach to the
market to one that is premised on their ability/capability to predict the
future,” he said.

He also said that market operators should track trends and policy thinking,
as well as build capacity internally for growth in order to take advantage of
the current change, and convert risks into opportunities.

The Lincoln Navigator comes with a big bang. Largeness,
heaviness, and flashiness are common eye-catching traits found in the SUV,
which enhances the status of its drivers. All these qualities and more are
found in the 2010 Lincoln Navigator.

It has an opulent interior, bold styling, sleek design, and
quiet navigation. The new model SUV has some minor improvements to its already
overall solid package.

Design

Standard features that come with it are 18-inch alloy wheels,
power liftgate, a rearview-mirror-mounted back-up camera, an auto-dimming
rearview mirror, parking sensors, dual-zone automatic climate control with rear
auxiliary controls, a tilt-and-telescoping steering wheel, driver memory
settings, heated and cooled second-row seats, and a heated, power-folding
third-row bench. The full-size luxury SUV comes with heavy chrome styling.

Other trims of the SUV are Optional Elite and heavy duty trailer
tow package. The former adds a navigation system for location finding, a
sunroof, and Sirius Travel Link with a rear-seat entertainment system, while
the latter is mainly used for heavy duty work with its automatic load-levelling
rear suspension, an integrated tow hitch, and a heavy-duty radiator and
transmission cooler.

Both options come with 20 inch wheels and rear-seat
entertainment system.

Interior

The interior of the 2010 Lincoln Navigator is dazzling with an
array of luxury features. It has voice activation system, and a 14-speaker
surround-sound audio system with a six-CD changer, satellite radio, and an
auxiliary audio jack. It’s got leather upholstery, a standard Sync voice
activation system that integrates with the navigation system, and also allows
for hands-free operation of mobile phones, iPods, and other MP3 players.

Under the Hood

The 2010 Lincoln Navigator is powered via a 5.4-litre V8 that
produces 310 horsepower and 365 pound-feet of torque.

It comes with a six-speed automatic transmission, which changes
shift quickly and comes as the only available alternative, even though one can
choose between two-wheel- and four-wheel-drive models. Properly equipped, a rear-wheel-drive
Navigator is capable of towing up to 9,000 pounds.

The SUV has the capability of covering a distance of 8.2 seconds
from zero to 60 mph.

Safety

The 2010 Lincoln Navigator is loaded with numerous standard
safety features that include stability control with a rollover sensor, traction
control, anti-lock disc brakes with brake assist, front-seat side airbags, and
three-row side curtain airbags.

A new addition for 2010 model is a Ford’s programmable MyKey
system, allowing parents to specify speed limits and stereo volumes for their
teenage drivers and children.

Price

The SUV has an official price of $57,155 (about N8. 6 million).

The behemoth
eventually bestirred itself. Except that this elephant could only give
birth to a mouse. The decisions reached last week by Central Bank of
Nigeria’s rate setting committee wrong-footed every pre-meeting
commentary. It was a pre-general election meeting, and giving the
uncertainty surrounding the elections, who knows, it may be the last
before the elections. Thus, election-related spending was expected to
entertain Monetary Policy Committee members. Although for the most
part, reports on the economy indicate that it is ticking away at a
decent pace (if not the furious gallop required to meet the Millennium
Development Goals) key sectors are barely keeping afloat. Incidentally,
the CBN’s remit is one of the most straitened of these ailing sectors:
too many dead men walking! Accordingly, since August last year, the
apex bank has struggled to ensure that the zombies do not hurt the
living, including through offering guarantees on all transactions on
the interbank market.

However, while this
“de-risking” has put a floor beneath a floundering industry, its
unintended consequence has been to constrain the process of financial
intermediation. Now, everyone agrees that this process is a basic need
if this economy must save at the levels consistent with its need for
investible funds, and thereafter, allocate such savings optimally. The
CBN has tried to meet this latter bill by arranging to clean up the
industry’s balance sheets, in such a way that the living-dead receive
fresh infusions of capital, and along with their better situated peers,
are then able to resume lending to the economy – preferably the private
sector. Unfortunately, its best efforts have been frustrated by a
lengthy legislative procedure, and the Asset Management Corporation set
up to take over the industry’s bad loans will, on the best assumptions,
now take-off sometime next year. In between, the apex bank has owned-up
to its impotence insofar as it comes to tinkering with the economy’s
short-term interest rates, and with respect to the surfeit of bank
liquidity that has pushed rates in the industry to unprecedented lows.
We’ve also heard that the “focus of the reform measures in the banking
sector is to impact the overall efficiency and stability of the system
in a manner that will ensure that banks play their appropriate roles as
transmission channels for resources to the real sector.” It is, on this
argument, therefore, government’s responsibility to ensure a conducive
environment for real sector growth.

Now, as we
approached last week’s meeting of the monetary policy, not only had
nothing changed in this dynamic, but the spectre of an election year
hung over all. Most people who cared to reflect on these issues were
thus justified in their reduced expectations of the committee’s
meeting. The MPC duly surprised, by tightening monetary policy!
Remarkably, the main tool for this is not the 25 basis points (one
hundredth of a percentage point) increase in the policy rate (MPR).
There is no known relationship between this rate, and the rates at
which banks reward depositors and price their risk assets. Instead, the
policy rate hike reinforced the central bank’s concern with rising
inflation. Ahead of the meeting provisional figures showed the consumer
price index moving from 13 per cent year-on-year in July this year to
13 per cent in August.

There is also good
reason to worry that both election-related spending this year, and the
liquidity-boosting activities of the Asset Management Corporation
(AMC), sometime next year, could exacerbate inflation going forward.How
does the tokenism implied by the MPR rise help anchor inflation
expectations? The jury is not likely to come in soon on this question,
at least until the apex bank has a handle on the channel(s) through
which changes in the policy rate bring about changes in real variables
in the economy. Still, there is much more clarity on the effect of the
2% increase in the returns banks expect to earn from overnight funds
kept with the central bank. Given that this is the new opportunity cost
of transactions in the money market, it is a safe bet that interbank
rates will go up.

Banks that currently lend in the market should witness an increase
in their interest income. And the only reason why borrowers in the
market will continue to have credit extended them is the fact of the
existing CBN guarantee.However, if other rates (deposits, bonds,
treasury bills) rise, then banks could have more problems.

Wal-Mart is in
talks to buy South Africa’s Massmart, a $4 billion deal that would give
the U.S. retailer a big presence in fast-growing Africa and boost its
emerging markets strategy. The world’s largest retailer has been hit by
weakness in the United States where low-income shoppers are
particularly vulnerable to unemployment and higher gasoline prices. It
has responded by focusing on cost cuts and international growth.

Buying Massmart,
South Africa’s third-largest listed retailer by value, would give
Wal-Mart a considerable network in Africa’s biggest economy and a
foothold in 13 other countries in sub-Saharan Africa. “Massmart is a
very good fit with their business,” said Bryan Roberts, global research
director at industry research firm Planet Retail in London.

Wal-Mart has made a
non-binding proposal of 148 rand per Massmart share, valuing it at
around 30 billion rand, a premium of nearly 10 percent over Thursday’s
close of 134.75 rand. Massmart said it has granted the U.S. firm an
exclusivity period and there is no certainty of a formal offer. But
Massmart’s share price jumped 11 percent to 150 rand, above the value
of the proposed offer.

Wal-Mart’s shares
fell 0.4 percent to $53.85 and some analysts said the acquisition might
not be the best use of Wal-Mart’s cash. “Wal-Mart should be allocating
its capital first and foremost to developing U.S. urban stores and then
returning cash to shareholders,” Wall Street Strategies analyst Brian
Sozzi said in a note to clients.

Wal-Mart would
become the first major international retailer to enter South Africa,
but others could soon follow by targeting one of Massmart’s local
competitors, Roberts said. “There’s no shortage of good businesses that
could be acquisition targets — Shoprite, Woolworths and the like.”

Home to some of the
world’s fastest growing markets, Africa also boasts an emerging middle
class and roughly 1 billion consumers, making it an increasingly
attractive target for overseas investors. The deal would be Wal-Mart’s
biggest acquisition since it bought British supermarket operator Asda
in 1999.

The bid values
Massmart at 26.3 times its 12-month adjusted earnings per share,
according to Thomson Reuters data. That compares to 21.5 times for
Shoprite and 15.5 times for Woolworths. A deal is also likely to boost
South Africa’s rand which would benefit from an inflow of currency. The
rand hit a 2-1/2 year high of 6.9776 against the dollar.

Vote of Confidence

Massmart sells
general merchandise, electronics and food via a low-margin, high-volume
model. It runs nearly 290 stores and nine different retail and
wholesale chains.

It has also been
one of the most aggressive of South Africa’s retailers in expanding
into the continent. The company has 24 stores on the continent outside
of South Africa, including Nigeria, Africa’s most populous nation.
Revenue totalled 47.6 billion rand in the year to end-June, having
grown more than fourfold in 10 years. Operations outside of South
Africa now account for about 8 percent of its revenue.

The
world economic growth has remained unbalanced, making global economic
forecast for this year and next difficult, a report from the
Organisation of the Petroleum Exporting Countries (OPEC) has said.

The OPEC, in its
Oil Market Report, September 2010, said the persisting impact of the
recent global recession, as well as “the ongoing effects of the
unprecedented government-led stimulus” have created a significant
amount of uncertainty in forecasting gross domestic product (GDP)
growth for most countries.

“The world economic
growth in 2010 remains unchanged since the previous report at 3.9 per
cent, while 2011 has been revised down slightly to 3.6 percent. The
imbalance in global growth has intensified, with a deceleration
becoming apparent in most of the Organisation for Economic Co-operation
and Development (OECD) countries, while developing countries continue
to expand,” the report said.

Repeated revisions

According to the
report, repeated revisions to world economic growth – a key driver of
oil demand – has made forecasting oil market developments in 2010
particularly difficult.

“This is in
addition to other highly uncertain factors, such as the sectorial
distribution of growth, the price of oil relative to its substitutes
and weather conditions, which also impact oil consumption,” it said,
adding that as a result, the forecasts for oil demand are subject to
frequent revisions.

It also said the
main driver behind these revisions has been the stronger-than-expected
impact of fiscal and monetary stimuli enacted by governments and
central banks across the globe.

The OPEC said the present economic condition in most developed countries is discouraging.

“The economic
recovery is not only slow, but is also facing turbulence. The fact that
some OECD countries can no longer afford stimulus plans is likely to
pressure their economies in the second half of this year, leading to
weaker oil demand compared to the first half,” it said.

Nevertheless, the
report said the global economic recovery that started during the second
half of 2010 is projected to continue throughout 2011, however, at a
slow pace. It added that the recovery in oil demand next year will take
place in approximately all quarters, although with more strength in the
second half of the year.

‘Nigeria can improve’

Akinbade Ibisiola,
head, research team at Resource Cap, a portfolio management company,
said the current growth of the Nigerian economy can be improved upon.

“Since Nigerian
economy is a developing market, the much acclaimed GDP growth, which is
presently in the region of 7 percent, can be improved upon if our
country embarks on more developmental projects that can boost the
nation’s economic performance,” Mr. Ibisiola said.

Meanwhile, the
governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi,
last Friday, said most emerging market economies have been known to use
the domestic financial institutions to execute real sector “big ticket
projects” and financial institutions in Nigeria should not be an
exception, if the country hopes to achieve its developmental objectives.

“The CBN is focusing attention on ensuring that the financial
system, in general, and the banking system, in particular, begins to
serve the needs of the Nigerian economy so as to make the Nigerian
economy to be resilient,” Mr. Sanusi said.

Nigerian interbank
lending rates eased to 3.5 percent on average last week from 4.0
percent the previous week due to an increase in liquidity, traders said.

Dealers said the
disbursement of large budgetary allocations to the three tiers of
government — federal, state and local government — had raised
liquidity levels and pushed the cost of borrowing among banks down.

“What would have
happened is that rates would have dropped significantly to around 1.0
percent due to the huge cash inflows from budget disbursement but for
the increase in the benchmark interest rate on Tuesday by the central
bank,” one dealer said.

Nigeria plans to
raise just under N127 billion ($843.8 million) in 91-day, 182-day and
364-day treasury bills next week, the Central Bank of Nigeria said on
Monday.

The regulator said
it would issue N31.57 billion in 91-day bills, N45 billion in 182-day
bills and N50 billion in one year paper using the Dutch Auction System
on Thursday.

The results of the auction would be released the following day, the
bank said. Bond dealers said they expected a significant rise in yields
in line with last week’s increase in the benchmark interest rate to
6.25 percent from 6.0 percent.

Bank officials said the closure of bank
branches not performing optimally is not a sign of distress since banks
usually monitor operations to ensure they are not operating below their
running costs.

Some banks are planning to close
branches which they consider unprofitable but they require the approval
of the Central Bank of Nigeria which, as the regulator of the banking
sector, has to authorise such closure before it can be effected.

“It is not an issue of worry when banks
access their bank branches periodically and take management decisions
on whether to close those performing under expectations and/or open new
branches as the case may be” said a source at Spring Bank.

“We issued a communiqué about
four-months ago when we closed some branches that were not yielding
revenue and were performing below expectation. The rent you pay for
some locations are not realistic when you compare it to the revenue
generated from such branches and the proper thing to do is to close it
down. For instance, it does not make economic sense now to have about 3
branches in a single street. It is called branch optimisation, not
closure, because another branch could be opened elsewhere”.

The unplanned delay in the take-off of
the Asset Management Corporation of Nigeria (AMCON) and the fate of
rescued banks have continued to fuel speculations that another round of
staff layoffs and branch closures loom.

However, rescued banks have repeated
that nothing of the sort is on their agenda, and that closing down non
performing branches is not really a crime.

“That is not true”, a source at
Intercontinental Bank said. “We have not closed down any branches. I
have just done a nationwide investigation and all our branches are
functioning and there is no intention for any one to be closed. Rather
than close branches, we have just opened two again. All our branches
are operating and undergoing good business”.

Another source at Oceanic Bank, also
one of the rescued banks, said it is not true that the bank is closing
its branches as it has no reason to do so.

However, a staff at Union Bank said banks’ closing some of their branches is not an unlikely possibility in the nearest future.

“This is not utterly unavoidable, but
it is just that there are stages and procedures that need to be
approved by the industry’s regulatory body, the Central Bank of
Nigeria. The thing is just that branches are not just closed down like
that. It’s a long process, because you need to convince the Central
Bank why it is expedient for you to do that and other processes that
have to be followed” the Union Bank staff said.

The way forward

Experts from
various finance institutions in Nigeria and abroad have pushed for
branchless banking; even though they have expressed concern over
security and the level of risk exposure that could be expected from the
implementation of this system.

Major challenges
however remain for the establishment of an effective branchless banking
system; a system where banks’ strategy for delivering financial
services does not necessarily depend on branches. In the Nigerian
banking environment, there’s the need to find alternative ways of
conducting face-to-face interviews or identity checks.

For branchless
banking to develop, experts have suggested that governments need to
continue to work with service providers to find flexible solutions that
meet policy and business requirements.

Consultative Group
to Assist the Poor (CGAP), a global resource centre for microfinance
standards, operational tools, training, and advisory services in one of
its programmes in Nigeria said “Branchless banking has great potential
to extend the distribution of financial services to poor people who are
not reached by traditional bank branch networks; it lowers the cost of
delivery, including costs both to banks of building and maintaining a
delivery channel and to customers of accessing services”.

His mother wants to go on a pilgrimage
to Jerusalem. His parents badly need a new car. Her brother doesn’t do
very much and can’t pay his own rent. His sister’s husband was just
laid off by his bank a year ago, they have no savings at all but school
fees are due and a new baby is on the way. He hasn’t addressed his
family’s immediate needs and says there is no money for a family
vacation this year, yet he is writing a cheque to fund all this.

Her father will buy her a brand new car
since all he can afford is a “tokunboh;” she is not accustomed to
second hand cars. Her parents will upgrade her to business class
because that is what she is used to – he can’t expect her to travel
economy? Her mother buys the grandchildren expensive gifts and his
can’t afford to match that kind of spending which always makes his
family look like the “poorer relations”.

What is social security?

Social security is a term that refers
to personal financial assistance, in its various forms. This in many
countries is a field of social welfare and insurance from which people
receive services or benefits in return for contributions to an
insurance scheme. It is a government’s responsibility to provide for
the basic welfare of the most vulnerable members of the society such as
the very young, the elderly, and the infirm. The objective is to ensure
a threshold subsistence level below which any worker who has paid into
a programme cannot fall.

Where the vast majority of workers are
employed in the informal sector, it is nearly impossible for them to be
covered by any formal government based system, as this is designed to
target formal sector workers. Even where a formal mechanism has been
introduced to provide free basic medical care for the elderly in some
Nigerian states, only a small part of the population is actually
covered and the quality of that care is often called to question.

The extended family

The extended family, which is usually
made up of several generations of people who are related by blood,
marriage, or adoption, is the very foundation of Nigerian social life.
This family group consists of not only a nuclear family made up of
parents and their children, but embraces siblings, grandparents, aunts,
uncles, cousins, and even more distant relatives.

In the absence of a formal and
effective social security system, the extended family system has
evolved into a homegrown version of a more formal welfare system.
Through this basic economic unit, individuals are able to build
networks and pool resources beyond their own to meet pressing needs
such as the education of children and the general welfare of their
relatives.

It is based on principles of
togetherness and reciprocity, involving obligations on members to be
supportive of one another in times of need. This form of co-operation
has had a huge impact on the life of most Nigerians and much of the
emerging world. Almost everyone, in a way or another, is a beneficiary
of a system that plays a role in the care of children and the aged,
with assistance at weddings and funerals, the funding of education,
supporting business ventures, providing shelter in the city, and so on.

Even where one cannot shoulder all the
financial responsibility, and often it is not all about money, one can
still show some concern by contributing in other ways to ease the
burden on a relative. One can provide encouragement and mentorship to
struggling members who have shown potential. Some of the extraordinary
talent in our communities just needs a little attention for it to
blossom. With the difficult economic situation in most Nigerian homes,
it is not easy to stand by if you are in a position to at least render
some help.

In an ideal world, the extended family
provides essential financial and emotional support. When the financial
burden is shared, the burden on individuals is reduced.

Often however, some family members
begin to see it as their right to be provided for by more able members,
and they fail to strive to work hard or contribute in any way. This
sense of entitlement can lead to tension and resentment due to the
complex relationships that exist, with varied earning powers within the
family, unhealthy rivalry and competition. This can lead to conflict
and the breakdown of family ties where issues are not resolved.

Is the extended family system weakening?

Today, Nigerian society has witnessed
significant changes in the extended family system. As a result of
urbanisation, modernisation, globalisation, and other socio economic
factors, we see a gradual dilution of the extended family system. Many
families are caught between the traditional family system that is
characterised by strong family cohesion and group orientation, and the
modern system, which is individualistic, and the nuclear family appears
to be gradually playing a dominant role.

It is of note that Nigerians in
Diaspora continue to send money home to help relatives to meet pressing
needs; this demonstrates that in spite of the fact that these Nigerians
are living and working within the nuclear family setting more common in
the Western world, there is still the strong pull and unity of the
extended family system in the support of relations far away.

Until an organised and effective
welfare and social security system is in place, the extended family
system will continue to play a crucial role in the social welfare of
its members. At the same time, it is clear that as socioeconomic
conditions, cultural values, and technology, continue to evolve, so too
will the face and structure of the extended family in contemporary
society. In whatever form it takes, we must try to protect it.