Nigeria Content Online

Nigerian interbank lending rates rose to 4.0 per cent on average last week, from 1.66 per cent the previous week, after large cash withdrawals drained liquidity from the system.

The secured Open Buy Back climbed to 3.5 per cent from 1.50 per cent, 75 basis points above the Standing Deposit Facility (SDF) rate and 4.5 percentage points below the 6 per cent central bank benchmark rate, Overnight placement rates rose to 4.0 per cent from 1.75 per cent, while call money closed at 4.5 per cent compared to 1.75 per cent. According to a Reuters report last week, the cost of funds on the interbank will spike further early next week as market liquidity continues to thin out.

Bank officials however say the rates surge should not necessarily lead to any major disruptions in business or bank lending as it is not an unusual occurrence in the money market.

“Many factors are responsible for rates surging. Usually, towards the end of the month, interbank rates are high because a lot of payments need to be made at the end of the months and banks need to be liquid. Companies need to pay staff, interests on loans need to be paid, and so many factors determine it. The relationship between banks also determine the rates they would operate with,” a source at Oceanic bank said.

Withdrawals by large organisations and the demand for funds for foreign exchange purchases at bi-weekly official auctions also help to drain liquidity in the market, pushing up the cost of borrowing among banks.

Lending rate not encouraging

Experts have called on banks to address their strategy regarding the need to create new assets, as lending rates are still high.

Sanusi Lamido Sanusi, the Central Bank Governor says weak bank lending is a “major worry”. And that although he wants single-digit inflation by the end of the year, the central bank will do nothing to jeopardise economic growth. “Bank lending has not been growing as fast as we would like it to grow. So as far as upside risk to inflation, it is not very high,” Mr Sanusi said in the Reuters report.

Experts however say the election induced increase in government spending and the establishment of an asset management company to soak up bad bank loans should help put more money into the system.

Akinbamidele Akintola, a research analyst at Renaissance Capital, an investment banking firm said the Central Bank’s reforms would yield positive results on the entire sector. “I am of the opinion that we need to key our eyes on the ball and that would be the reforms by the Central Bank. It is ongoing and it is definitely going to yield some positive results for the entire sector. The AMCON Bill has been signed into law and the Presidency is committed to getting a competent team of people to man the corporation and all of this is in the pipeline. By and large, we expect a gradual turnaround in the banks as the Central Bank continues to make concerted efforts to stimulate the recovery of the financial system by acquiring non-performing loans from the banks and assisting them in improving their capital and liquidity,” he said.

Bank officials say the regular cash inflows from the monthly budgetary disbursals to government agencies however usually has major impact on liquidity in the economy and can ease the rising interbank rates.

In order to ensure a smooth interface in the fight against money laundering in Nigeria, the International Monetary Fund (IMF) on Monday initiated a partnership with the National Financial Intelligence Unit (NFIU) and the National Drug Law Enforcement Agency (NDLEA).

According to the IMF, the partnership is aimed at providing “technical assistance” to anti-money laundering agencies in Nigeria, and ensuring that offenders are duly prosecuted.

“We are in Nigeria to conduct an assessment of technical needs of anti-money laundering agencies,” said Manuel Vasduez, the IMF team leader, at the anti-narcotics agency’s office in Lagos.

Mr. Vaduez, who was received by Norman Wokoma, head of NFIU, and Ahmadu Giade, the NDLEA chief excutive, also made a case for training and greater interface among law enforcement agencies in the country, as he noted that this will enhance their operations.

Speaking on the development, Giade promised full cooperation with stakeholders in the fight against money laundering, adding that the anti-drug trafficking agency has the mandate to combat money laundering.

“NDLEA is the first agency vested with the power to fight money laundering crime in the country. We are committed to total war against money laundering and will interface with relevant bodies in building capacities in addressing the money laundering cases,” said Mr. Giade.

Suspects to forfeit assets

Meanwhile, Femi Oloruntoba, director of prosecution and legal services for the anti-narcotics agency, said that the NDLEA has an amended Act before the National Assembly whereby drug suspects evading prosecution will forfeit their assets if after two years they fail to show up.

Mr. Oloruntoba, however, disclosed that the action would only be taken after it is made public that the suspect in question had refused to honour the agency’s invitation for prosecution.

“Before such assets are forfeited, there will be a publication in a national newspaper to that effect after the two-year period,” he said.

The governor of Kenya’s central bank said on Monday that a lack of awareness was hampering growth of the insurance industry in East Africa’s largest economy, where only 7 percent of its 39 million people are insured.

At a meeting attended by several insurance firms, Njuguna Ndung’u asked industry executives to find new solutions to help widen the sector’s consumer base.

“A major challenge facing the Kenyan financial sector in general and the insurance industry in particular is the lack of awareness by the target market,” he said.

A third of the country’s population has no access to any form of banking.

Congo Republic is on track to be Africa’s fastest growing economy this year, but should control its investment spending, in part because key oil revenues are consistently coming in below expectations, the International Monetary Fund said.

The IMF trimmed Congo’s 2010 growth forecast to 10.6 percent from 12.1 percent and boosted its 2011 growth forecast to 8.7 percent from 6.6 percent, as increases in oil production have taken longer than anticipated.

“Developments in the international markets have been overall favourable for oil exporters like Republic of Congo,” the IMF’s resident representative, Oscar Melhado, told Reuters in an interview.

“However, oil revenues received are systematically lower than projected. This is an issue of concern,” he said.

Angola is set to export around 1.68 million barrels per day (bpd) of crude oil in November, down from about 1.75 million bpd in October, trade sources said on Monday.

Provisional loading programmes from state oil company, Sonangol, showed 51 cargoes of crude oil scheduled to load in November with a daily average of 1.63 million bpd.

In addition to these cargoes, two parcels of Palanca crude will also load, adding another 50,000 bpd to the total scheduled exports.

If the export estimates for November are correct, Angola’s exports will be above its target set by the Organization of the Petroleum Exporting Countries.

Nigeria’s all-share index falls to a new 6-month low, declining 0.50 percent to 22,879.33 points on Monday, as it continues to erode its year-to-date gains.

The index was up 25 percent on the start of the year in early August, placing it among the best-performing frontier markets, but has since been on a steady decline, partly amid concern about the pace of bank reforms.

Year-to-date, sub-Saharan Africa’s second biggest market is up 9.85 percent.

The market closed flat after a relatively volatile session, where the index hit a peak of 0.19 percent and a low of -0.22 percent. Market turnover fell 25 percent as investors were cautious in taking positions.

Some market operators have expressed the fear that shareholders’ investments in some sanctioned companies may be seriously affected if the companies are eventually delisted, following the recent warning given to them by the Nigerian Stock Exchange (NSE).

The NSE had, two weeks ago, placed 15 quoted companies on “full suspension” – meaning there will be no transaction on their shares – and directed that if by Monday, 11th October, the companies fail to render their arrears of audited and interim accounts, the Exchange will commence formal delisting process on them.

Meanwhile, only Stokvis Plc and Nigeria Wire & Cable Plc have complied.

David Amaechi, an executive member of the Shareholders Association of Nigeria, said, “In this kind of scenario (delisting of companies), our record shows that shareholders are always on the losing side.”

Mr. Amaechi said once the Exchange delists a company, “monitoring the activities of the company becomes very difficult for shareholders to deal with,” adding that investors who are not comfortable with the company’s performance “always find it hard to sell off their share holdings in the company.”

Class Action

A legal practitioner at The Market Ombudsman, Ope Banwo, said shareholders who lose out as a result of the delisting of their companies from the NSE for lack of corporate compliance “can file liability lawsuits against the individual corporate officers.”

Mr. Banwo also said that a ‘Class Action’ lawsuit against the officers by shareholders is also an option for damages caused by any delisting.

However, he said, “shareholders have a responsibility to hold their executives accountable and if they allow their executives to ignore the law, then they must pay the price for delisting. Once shareholders know that their interests will be compromised by actions of executives, they will be more vigilant to demand corporate accountability.”

‘Not a strong fear’

But Sola Oni, NSE’s head of corporate communications, said that the fear that shareholders may lose out if their company get delisted “is not a strong fear.”

Mr. Oni said delisting exercise to the NSE is a routine issue that is not new.

“We have given those companies deadlines within which they are supposed to regularise their standings. If a company has failed to do that until the deadline and the shareholders are looking, then the NSE will play its role,” he said.

“Now that we have published the names of the companies that flouted our rules, the duties of the shareholders is to rally round and impress on those companies’ managements to do the right thing,” he said.

Mr. Oni further said that if a company gets delisted after been placed on full suspension and failure to meet the deadline, investors who owned shares in the company can no longer use the Exchange’s trading platform to sell or buy the company’s shares again.

However, he explained that delisting a company from the NSE “does not mean that the company cannot operate again. The company should still remain in business, which doesn’t stop them from paying dividends to their shareholders.”

In order to ensure a smooth interface in the fight against money laundering in Nigeria, the International Monetary Fund (IMF) on Monday initiated a partnership with the National Financial Intelligence Unit (NFIU) and the National Drug Law Enforcement Agency (NDLEA).

According to the IMF, the partnership is aimed at providing “technical assistance” to anti-money laundering agencies in Nigeria, and ensuring that offenders are duly prosecuted.

“We are in Nigeria to conduct an assessment of technical needs of anti-money laundering agencies,” said Manuel Vasduez, the IMF team leader, at the anti-narcotics agency’s office in Lagos.

Mr. Vaduez, who was received by Norman Wokoma, head of NFIU, and Ahmadu Giade, the NDLEA chief excutive, also made a case for training and greater interface among law enforcement agencies in the country, as he noted that this will enhance their operations.

Speaking on the development, Giade promised full cooperation with stakeholders in the fight against money laundering, adding that the anti-drug trafficking agency has the mandate to combat money laundering.

“NDLEA is the first agency vested with the power to fight money laundering crime in the country. We are committed to total war against money laundering and will interface with relevant bodies in building capacities in addressing the money laundering cases,” said Mr. Giade.

Suspects to forfeit assets

Meanwhile, Femi Oloruntoba, director of prosecution and legal services for the anti-narcotics agency, said that the NDLEA has an amended Act before the National Assembly whereby drug suspects evading prosecution will forfeit their assets if after two years they fail to show up.

Mr. Oloruntoba, however, disclosed that the action would only be taken after it is made public that the suspect in question had refused to honour the agency’s invitation for prosecution.

“Before such assets are forfeited, there will be a publication in a national newspaper to that effect after the two-year period,” he said.

Some market operators have expressed the fear that shareholders’ investments in some sanctioned companies may be seriously affected if the companies are eventually delisted, following the recent warning given to them by the Nigerian Stock Exchange (NSE).

The NSE had, two weeks ago, placed 15 quoted companies on “full suspension” – meaning there will be no transaction on their shares – and directed that if by Monday, 11th October, the companies fail to render their arrears of audited and interim accounts, the Exchange will commence formal delisting process on them.

Meanwhile, only Stokvis Plc and Nigeria Wire & Cable Plc have complied.

David Amaechi, an executive member of the Shareholders Association of Nigeria, said, “In this kind of scenario (delisting of companies), our record shows that shareholders are always on the losing side.”

Mr. Amaechi said once the Exchange delists a company, “monitoring the activities of the company becomes very difficult for shareholders to deal with,” adding that investors who are not comfortable with the company’s performance “always find it hard to sell off their share holdings in the company.”

Class Action

A legal practitioner at The Market Ombudsman, Ope Banwo, said shareholders who lose out as a result of the delisting of their companies from the NSE for lack of corporate compliance “can file liability lawsuits against the individual corporate officers.”

Mr. Banwo also said that a ‘Class Action’ lawsuit against the officers by shareholders is also an option for damages caused by any delisting.

However, he said, “shareholders have a responsibility to hold their executives accountable and if they allow their executives to ignore the law, then they must pay the price for delisting. Once shareholders know that their interests will be compromised by actions of executives, they will be more vigilant to demand corporate accountability.”

‘Not a strong fear’

But Sola Oni, NSE’s head of corporate communications, said that the fear that shareholders may lose out if their company get delisted “is not a strong fear.”

Mr. Oni said delisting exercise to the NSE is a routine issue that is not new.

“We have given those companies deadlines within which they are supposed to regularise their standings. If a company has failed to do that until the deadline and the shareholders are looking, then the NSE will play its role,” he said.

“Now that we have published the names of the companies that flouted our rules, the duties of the shareholders is to rally round and impress on those companies’ managements to do the right thing,” he said.

Mr. Oni further said that if a company gets delisted after been placed on full suspension and failure to meet the deadline, investors who owned shares in the company can no longer use the Exchange’s trading platform to sell or buy the company’s shares again.

However, he explained that delisting a company from the NSE “does not mean that the company cannot operate again. The company should still remain in business, which doesn’t stop them from paying dividends to their shareholders.”

Nigerian interbank lending rates rose to 4.0 per cent on average last week, from 1.66 per cent the previous week, after large cash withdrawals drained liquidity from the system.

The secured Open Buy Back climbed to 3.5 per cent from 1.50 per cent, 75 basis points above the Standing Deposit Facility (SDF) rate and 4.5 percentage points below the 6 per cent central bank benchmark rate, Overnight placement rates rose to 4.0 per cent from 1.75 per cent, while call money closed at 4.5 per cent compared to 1.75 per cent. According to a Reuters report last week, the cost of funds on the interbank will spike further early next week as market liquidity continues to thin out.

Bank officials however say the rates surge should not necessarily lead to any major disruptions in business or bank lending as it is not an unusual occurrence in the money market.

“Many factors are responsible for rates surging. Usually, towards the end of the month, interbank rates are high because a lot of payments need to be made at the end of the months and banks need to be liquid. Companies need to pay staff, interests on loans need to be paid, and so many factors determine it. The relationship between banks also determine the rates they would operate with,” a source at Oceanic bank said.

Withdrawals by large organisations and the demand for funds for foreign exchange purchases at bi-weekly official auctions also help to drain liquidity in the market, pushing up the cost of borrowing among banks.

Lending rate not encouraging

Experts have called on banks to address their strategy regarding the need to create new assets, as lending rates are still high.

Sanusi Lamido Sanusi, the Central Bank Governor says weak bank lending is a “major worry”. And that although he wants single-digit inflation by the end of the year, the central bank will do nothing to jeopardise economic growth. “Bank lending has not been growing as fast as we would like it to grow. So as far as upside risk to inflation, it is not very high,” Mr Sanusi said in the Reuters report.

Experts however say the election induced increase in government spending and the establishment of an asset management company to soak up bad bank loans should help put more money into the system.

Akinbamidele Akintola, a research analyst at Renaissance Capital, an investment banking firm said the Central Bank’s reforms would yield positive results on the entire sector. “I am of the opinion that we need to key our eyes on the ball and that would be the reforms by the Central Bank. It is ongoing and it is definitely going to yield some positive results for the entire sector. The AMCON Bill has been signed into law and the Presidency is committed to getting a competent team of people to man the corporation and all of this is in the pipeline. By and large, we expect a gradual turnaround in the banks as the Central Bank continues to make concerted efforts to stimulate the recovery of the financial system by acquiring non-performing loans from the banks and assisting them in improving their capital and liquidity,” he said.

Bank officials say the regular cash inflows from the monthly budgetary disbursals to government agencies however usually has major impact on liquidity in the economy and can ease the rising interbank rates.