Nigeria Content Online

Nigerian IT
distributors won five out of 12 RITA Awards, the first-ever initiative
for African channel partners last week, in a further acknowledgement of
Nigeria’s increasing importance as a world-class IT market.

Three of the
country’s leading resellers of IT products from the African nation took
home the majority of the 12 Redington IT Africa (RITA) Awards, during
RITA’s inaugural event held in Dubai recently.

Nigerian
distributors, Park N Shop, Ajatech Computers Limited, and Systemtech
Services Limited shared between them five of the 12 RITA Awards, after
beating off fierce competition from their counterparts in other African
countries.

Redington Africa is
the leading IT distributor and supply chain systems provider and boasts
of an impressive client portfolio including Acer, Canon, HP, IBM,
Samsung, Toshiba, and Western Digital, among others.

In his address at
the RITA Awards, Raj Shankar, Managing Director for Redington Gulf,
said: “Emerging markets in Africa will continue to drive our expansion
strategy due to the strong demand for quality IT products and economies
keen to implement the most sophisticated solutions.” More than 60
leading channel IT partners from 12 countries from Africa were
represented at the awards function which took place in Dubai.

Redington Gulf,
part of the Bombay Stock Exchange (BSE) listed Redington India Ltd, is
one of the leading and fastest growing IT distributors in the Middle
East and Africa region.

Introduced in 2010,
RITA is a Redington IT Africa initiative to reach, relate, reward and
recognize channel business and performance while allowing vendors to
promote their brands & products.

The
governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi,
has said that the banking sector will feel the death of late Umar Musa
Yar’Adua more than any other sector.

Mr. Sanusi made this assertion when he paid a visit to the Kano State governor, Ibrahim Shekarau, over the weekend.

“My
hope is for our new president, Goodluck Jonathan, to continue from
where late president Yar’Adua stopped so that there will be sanity in
the banking sector.” He said that late Yar’Adua was a dogged fighter
against corruption, which virus has eaten up the entire system,
stressing that his death has created a negative impact that can’t be
quantified.

Mr. Sanusi added that the banking reform will go a long way in reviving our country’s economy.

He
added that late Yar’Adua was one of the few leaders in Nigeria that has
done well within the short time that he was in leadership.

No major policy shift

Finance
experts, however, stated that there is likely to be no major policy
shift in sight, following the demise of the president of Nigeria.

Renaissance Capital, an international finance firm, said no major policy course shift is being expected.

“Nigerian
authorities will continue to pursue a countercyclical macroeconomic
stance, as illustrated by the expansionary 2010 budget that was
recently approved by Goodluck Jonathan. We believe some of the key
reforms initiated under the Yar’Adua administration are likely to be
implemented and executed going forward.”

“Last
week, the Senate adopted the asset management company bill, which has
to be signed by Mr. Jonathan and will be a critical step to help
restore confidence in the banking system and the real economy as a
whole. Added to this, the petroleum industry bill is being discussed at
the parliamentary level and could be passed into law at some stage,
boosting the relevance of the oil sector in Nigeria’s domestic output.

“Furthermore,
Mr. Jonathan has promised that the 2011 general elections will be free
and fair, and recent and forthcoming changes at the Independent
National Electoral Commission are likely to be monitored closely in
this regard. The tackling of corruption also remains a top priority for
the new administration. Additionally, the sustainability of the peace
process in the Niger Delta region is seen as a fundamentally important
issue by top officials, notably as oil production has rebounded to
1.95-2.0mn bpd since Dec 2009.

Finally,
we do not expect the markets to be volatile post the passing of the
president, as the recent political environment has already been priced
in.

Indeed,
Jonathan has asserted himself incrementally, especially after
appointing a new cabinet, and has emerged as the country’s leader
domestically and internationally (following his trip to the US) amid
indications that key reforms in the pipeline would be addressed, in
areas such as the financial system, the petroleum industry and
electoral reforms.”

State of the economy

Afrinvest
West Africa, a finance and research analysis firm, said Nigeria’s
economic performance, in line with the late president’s policies, in
the first quarter of 2010, proved remarkably resilient.

In
a report, Afrinvest says provisional data provided by the National
Bureau of Statistic (NBS) indicates that real Gross Domestic Product
grew by 6.7 per cent in first Quarter 2010, up from the 4.5 per cent
recorded in the corresponding period in 2009.

“External
reserves stood at $41.0bn at the end of March, compared to $42.4
billion in January 2010; this is expected to cover imports for the next
three quarters. Oil production peaked at 2.4million barrels per day
(mbpd) in the last quarter of 2009 and remained relatively stable
around the 1.9-2.1mbpd range throughout Q1, following the return of
stability to the Niger-Delta through the federal governments amnesty
program.”

The
report also added that “Oil prices also rebounded, largely trading
around the $80.0 per barrel mark. The 2010 budget had initially been
predicated on a conservative oil price estimate of $57.0 per barrel; we
believe oil prices will remain around the $80.0 mark in the near term
as the global economy firms up”.

Nigeria’s
President Yar’Adua passed away on May 5 in Abuja. His health worsened
last year, forcing him to seek medical treatment in Saudi Arabia in
late November. While he returned to Nigeria in February 2010, he did
not publicly address the nation in the weeks afterwards, fuelling
speculation about his condition.

The
controversial reforms in the banking sector, endorsed by the late
president and carried out by the Central Bank Governor, who was also
nominated by the president, can be said to be the hallmark of the
president’s economic reforms.

The
reforms, which started mid last year, have seen the exit of about eight
bank chiefs, a bailout package of N620 billion (about $4 billion) and a
declaration of losses by majority of banks who have released their 2009
common year end results, running into billions of naira, but of course,
have achieved better transparency in the books of the banks and the
presentation of more stable banks.

The management of
Oceanic Bank International plc has said continuing to disburse funds to
Aero Contractors on their expired credit facility with the bank will
amount to putting depositors’ funds at risk.

The bank’s
management explained that the aviation company had a series of
short-term facilities at an interest rate of between 17 and 19 per cent
per annum with the bank. The facilities expired in September 2009.

According to the
management, a renewal offer from the bank, which substantially
increased the tenor of the facility from between three months and one
year to a 10-year period at a reduced interest rate of 12.5 per cent,
has been on the table for Aero since December 15, 2009. It said the
offer has not been accepted by the board and management of Aero to date.

“Whilst Oceanic
Bank remains committed to supporting Aero, the absence of a valid
contractual loan agreement will put depositors’ funds at risk,” the
bank’s management said.

This follows what
the bank describes as “insensitive statements” in the media by Aero
Contractors including a spate of reports portraying Oceanic Bank as
starving Aero of operational funds.

“Our transaction
with Aero is transparent and indicative of our commitment to supporting
businesses in a manner that provides equity and mutual benefit to the
Bank and its customers.

“We have bent over
backwards to support Aero and have been waiting for an acceptance of
our credit renewal since 15 December, 2009. We are very certain that
the level of positive support given to Aero by Oceanic will be very
difficult to replicate by any bank in this environment.”

“However, it would
appear that Aero just wants access to credit facilities without
provision to pay back. The way forward is for Aero to pay down the
facility or accept the renewal offer.”

Confirming the
mediatory role of the Minister of Aviation, Fidelia Njeze, in ongoing
negotiations, Oceanic Bank’s GMD/CEO, John Aboh, said he was optimistic
of an amicable resolution of the issues at the end of the process.

Meanwhile, Aero’s
account with Oceanic Bank remain operational across its branches
nation-wide as against media reports that their accounts had been
frozen.

Flying on low funds

Aero Contractors,
one of Nigeria’s oldest commercial airlines involved in domestic and
regional transport business, is facing challenges following accumulated
debts of about $200m.

In April, the
airline, which has been in regular negotiations with its banker
(Oceanic Bank Plc) for about six months, disclosed that it has now
reached a point where it is difficult to operate on the terms of
discussions with the financial institution.

The airline had
alleged, in a statement, that the bank, on April 23, froze its accounts
effectively preventing it from paying its suppliers and lessors,
including the Canadian Helicopter Company (CHC).

“The dilemma
centres on the allocation of historical debt. The management teams at
Oceanic Bank and Aero have been in constant dialogue about this matter
for the previous six months. However, they have been unable to agree on
a resolution that will allow Aero to continue trading as a going
concern,” said the carrier in a statement.

The airline is
noted for the introduction of online booking by passengers and recently
introduced an advanced pricing strategy and price optimisation
application called Aviator, which has a capacity of making available 26
different types of fare on every flight for passengers.

Professionals in
the Nigeria aviation industry have called on the federal government to
get involved in the ongoing brawl between Aero Contractors and Oceanic
bank.

Describing the
disagreement between the carrier and its financier as another threat to
the much depleted airline sector, the experts disclosed that our
country’s aviation image will be tarnished internationally should Aero
become grounded.

“The Nigerian
aviation image and heritage will be further dented with the acronym
liquidation, considering that this will be the fourth carrier within a
year, which makes us a very unstable country in the committee of civil
aviation nations, when small Tanzania can have a profitable carrier
called Precision Air which operates mainly with props,” said Olumide
Ohunayo, former president of the National Cabin Crew Association
(NACCA), over the weekend.

Cognizant that the
airline is “not totally grounded,” Mr. Ohunayo disclosed that if both
parties cannot resolve their differences quickly, the government should
take over the carrier temporarily, while the airline sources for
interim managers and new investors.

Describing the
government’s fund disbursement methods as “sketchy,” the one time NACCA
president disclosed that the government should assist the airline,
considering the excellent track record of the carrier.

“I think the oil
companies should also invest and an insider like Captain Olumide be
invited to assist in the restructuring,” he said.

Commenting on the
issue, Gabriel Olowo, chief operating officer Sabre Travel Network,
disclosed that assistance from the government at this point will be
invaluable considering the economic importance of airlines in a country.

“We’ve been talking
about bailout for Nigerian airlines for upwards of three years, without
result. One can only hope that Aero will also not stop flying before
government will come to their rescue, no matter how little,” he said.

According to Mr.
Olowo, no carrier in Nigeria today is free of debt, adding that if care
is not taken, the industry will become starved of carriers.

“A reputable
airline such as Bellview stopped flying for almost six months already
and no airline in the market can boast of a clean bill of its economic
health as we talk,” he said.

Already, three
indigenous carriers, including Afrijet, Bellview, and Capital airlines,
have suspended operations since January this year.

Meanwhile, Mr.
Olowo disclosed that “economic, and not financial, bailout” in terms of
debt forgiveness on landing, parking, over flight, ticket sales charge,
passenger service charge, value added tax (VAT), double taxation, among
others, are not only necessary but essential for continued survival of
Nigerian airlines.

“The airline income has been badly eroded by too many charges, hence
the sector has not witnessed growth, talk less of development, in the
last 30 years,” he said. “Nigeria’s business environment is also one of
the harshest in the entire world in terms of avoidable costs of
infrastructure, bad politics and bureaucratic bottlenecks that negate
good business delivery.”

In advance of the
third meeting this year of the central bank’s (CBN) rate-setting
committee (MPC), the quantity of tea taken in our banking halls has
gone up noticeably.

Arguably, the
supposedly rejuvenating qualities of this beverage, and the ungodly
hours that bankers are required to put in daily, could account for the
fact of its increased consumption. But bankers in the country today,
have more problems than this. The industry appears to have fallen in on
itself.

Aside from the
massive loan loss write-offs since August last year, rates in the money
market have nudged record lows on a daily basis. In part, this is
because the central bank’s most recent shot at bringing the industry’s
practices and philosophies up to scratch has made the traditional
haunts of banks’ wunderkinds (the capital market, the downstream sector
of the oil and gas industry, and the top-end of the build-to-own real
estate market) no longer attractive.

Surprisingly, a
much bigger part of the industry’s worries arises from the fact that
the central bank’s attempts to repair the damage to the financial
sector as part of its efforts to help a return to growth and the repair
of households’ balance sheets has had several adverse unintended
consequences.

Better governance
requirements, more robust risk management frameworks, and all of the
apex bank’s quantitative easing have not driven a recovery in the
industry’s intermediation function. Retail rates suggest a total
disinterestedness on the part of bankers with growing the liabilities
side of their balance sheets.

It is as if the
banks were telling deposit-rich segments of the economy to go away with
these deposits. At the same time, there ain’t much activity on the
asset side of the industry’s balance sheet. At this point, no one is
quite certain what the problem is. Nor for that matter what the
possible solutions might be.

Of course, having
taken a rap on the knuckles for immediate past excesses, the industry
is not minded to take risks at the margin anymore. So, one can
understand the reluctance to create speculative credits. But having
offered all manner of inducements and comfort arrangements in support
of a return to credit growth, the central bank ought now to be
concerned about the failure of banks to create meaningful credit in the
last two quarters.

So, what does the
apex bank do in addition to its existing policies? This is where I
think the increased tea drinking in the industry has more to do with
attempts by industry operatives to discern the monetary policy
trajectory through reading the tea leaves, than with the refreshment
offered by the beverage.

On this score, the
central bank has a lot to do still. It is increasingly useful to find
references in the central bank’s publications to the fact that owing to
current policies, inflation expectations in the domestic economy have
become properly anchored.

However, there are
good reasons to believe that there remains some confusion in the
economy about which of two things the apex bank should be addressing
its limited resources to. An independent monetary policy or a fixed
(managed) exchange rate policy? In the face of shocks to the economy in
the nature of recent events, which levers do the markets expect the CBN
to pull? And in which direction? Clarity on this would help to anchor
market expectations better than any declaration to the same effect
could.

But by far the
greatest need is for the central bank to restore the traditional
understanding of its functions. Under its immediate past governor, the
fervour with which the CBN took up the “Vision 20: 2020” thing created
the impression that single-handedly the apex bank could propel the
economy into the league of emerging economies.

The 2004
consolidation turned economic logic on its head. Bigger banks were now
to drive economic growth, rather than banks growing in response to the
needs of a growing economy. With all this focus on the financial
services sector’s capacity to grow the economy, the finance ministry
went to sleep.

Macroeconomic
policy, fiscal and monetary was in the CBN’s court. Truth is that as a
statement of policy nothing could be more wrong. To use an earthier
metaphor, to the extent that it is responsible for fiscal policy,
government has its foot on the economy’s accelerator. The apex bank, on
the other hand, applies the brakes.

Time for the MPC to help remind the economy of this relationship!

Some finance experts have said that the losses declared by some
of the banks in their December 2009 common year end result was not an
indication of a systemic risk in the industry.

According to the experts, majority of the concerns in the
industry have been captured in the joint audit carried out by Central Bank of
Nigeria Nigerian Deposit Insurance Corporation special audit of the banks last
year.

Akintola Akinbamidele, finance research analyst, Renaissance
Capital, West Africa, said there is no systemic risk in the industry.

“A lot of the concern in the banking sector have been captured and
brought into perspective during the CBN/NDIC audit in September 2009,” he said.
“Our outlook is fundamentally positive as we expect real GDP growth in Nigeria
to accelerate in 2010, and now that the expansionary budget has been approved
and the Asset Management Company bill has been passed while oil is still
trading at an average of 80 dollars to the barrel.”

Mr. Akinbamidele said a survey of the banks that have released
results, revealed that a majority of them were in the green.

“First Bank declared a strong set of numbers in the first
quarter, (1Q) and a lot of the other first quarter results from banks have been
in the green,” he said. “We expect concerted effort towards loan recovery in
2010 by the banks and we expect that Nigerian Bank’s 2010 profit forecasts are
well supported, as we forecast robust loan and deposit growth, a wider net
margin, an improved efficiency, lower loan loss provisions and a lower tax rate
of 20 per cent.”

Except for a few banks, majority of banks have declared losses,
especially in their December 2009 common year end results, raising concerns as
to the actual state of the banks and their ability to scale through after such
provisioning.

However, most of the banks have declared profits in their
released first quarter results, in contrast to the losses declared last year,
attributing this mainly to the success in the recovery level of otherwise
non-performing loans.

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

Access Bank also released its 2009 results with a loss before
tax of N3.5 billion Naira.

Eco Bank Nigeria Plc also released its audited results for the
common year end revealing a loss before tax of N5.944 billion and a loss after
tax of N4.588 billion, following a tax rebate, among others.

Managing the risk of
loan-loss provisioning

Razia Khan, regional head of research, Africa Head of
Macroeconomic Research, Standard Chartered Bank said recent measures in
addressing banks’ loan provisioning have included a review of existing
prudential guidelines, in particular the one per cent general loan loss
provisioning regime which was considered to be too pro-cyclical.

“At the end of last year, in order to lessen the burden of the
crisis on banks, the CBN announced that it would be waiving the 1 per cent
general loan loss provisioning requirement for a year,” she said.

“The regime is now being refined further. According to the
monetary authorities, a strong argument exists for implementing a different
provisioning regime for small and medium enterprises financing, agriculture,
and project finance that counters the pro-cyclicality in existing provisioning
guidelines.”

Ms. Khan also added that reforms are aimed at spreading risk
over a longer period of time, which should encourage more lending to the real
sector, despite the economic cycle.

“A framework for collateral adjustments to be taken into account in the
provisioning regime is also being developed,” she said. “With realisable
collateral, transparently valued at regular intervals, the hope is that a more
sound banking sector that is less subject to the volatility seen in the recent
past -when record loan-loss provisioning wiped out the capital of several
banks- will finally emerge.”

The stock market ended the past week in the green zone with
gains that are mostly attributed to buying pressure of investors. The activity
during the three days of trading in the week was a continuation of the market’s
adopted pattern since the beginning of the year, as trades were dominated by
speculations that were followed by quick profit reaping transactions.

Last week was particularly eventful following the death of
President Musa Yar’Adua, as Goodluck Jonathan became the nation’s substantive
president. Also, the Asset Management Company (AMC) Bill was passed by the
Senate on Wednesday. The bill is expected to unburden banks from toxic waste
and free their balance sheet through purchase of the bad loans, thereby
enabling banks to play their financial intermediation role effectively. With
this new development, we expect further stability in the capital market.

Market review

Activities in the stock market have been upbeat since the
beginning of the year as investors renewed optimism in the equity market due
largely to hopes that recent measures by Central Bank of Nigeria (CBN) and
other market regulatory bodies would sustain market recovery.

Positive earnings results of companies as released last week
reaffirmed hope for a sustained rebound, even as more investors had reasons to
turn positive and put money into the market.

In the past week, the NSE All-share index rose by 103 basis
points to close the week at 27,503.36 points.

Since the beginning of 2010, the market capitalisation has
gained more than 30 per cent. It closed on Friday at N6.65 trillion. Stocks
edged higher on Friday as investors looked to extend a strong run that has left
major indices up 0.38 per cent for the week. The current bullish trend should
continue in the months ahead. However, investors should exercise caution as the
market may witness minor correction phase.

During the week, both the market capitalisation and the NSE AS
Index gained 0.38 per cent respectively. So far, the market has recorded a
YTD-high market capitalisation of N6.78 trillion, representing a YTD yield of
33.33 per cent. Overall, the market traded a total of 1.75 billion units of
shares, valued at N17.11 billion in 25,710 deals.

The Banking sub-sector remains the most active (measured in
terms of traded volume) as it recorded 836.56 million shares valued at N9.42
billion exchanged in 11,033 deals while the Insurance sub-sector was second
with traded volume of 389.61 million shares valued at N349.39 million in 1,802
deals.

Corporate actions and
results

In the past week, ECOBANK Nigeria Plc released its full year
trading result to the floor of the Nigerian Stock Exchange. The company
declared a Gross Earnings of N59.864 billion representing an increase of 8.54
per cent from previous year’s trading result. The company also posted a Loss
After Tax of N4.588 billion.

Furthermore, ECOBANK also released its interim report for the
period ended 31st March, 2010 (First Quarter). A Gross Earnings of N13.703
billion was recorded, while a Profit After Tax of N1.071 billion was declared.

JULIUS BERGER Plc also released its interim report for the
period ended 31st March, 2010 (First Quarter) to the floor of the Nigerian
Stock Exchange. Julius Berger, which has 1.2 billion units of shares
outstanding, declared a Turnover of N31.414 billion and a Profit After Tax of
N780.959 million.

Similarly, JAPAUL Oil & Maritime Services Plc released its
interim report for the period ended 31st March, 2010 (First Quarter) to the
floor of the Nigerian Stock Exchange. The company, declared a Turnover of
N1.615 billion and a Profit After Tax of N425.515 million. The table below
shows full details of companies’ results and performances released during the
week.

Market outlook

Earnings projections of companies suggest that earnings should
continue to improve over the next couple of quarters. Earnings that exceed
expectations have been shown to be conducive to higher equity prices.

Given extremely low levels of interest rates, stock market activities will
surge higher, thereby creating more bullish sentiment.

The announcement on
23 April 2010 by Greece’s Prime Minister, George Papandreou, that his
country would draw on emergency aid from the IMF and the EU confirmed
fears about the toxicity of that country’s sovereign liquidity, and
solvency issues.

The subsequent
downgrade by Standard & Poor’s, a rating agency, of Spain’s
sovereign debts reinforced concerns that one consequence of Greece’s
incontinence might be what the IMF referred to in its April 2010 Global
Financial Stability Report (GFSR), as “a full blown and contagious
sovereign debt crisis”. Together with the EU (contributing €30 million
into the rescue fund), the Fund is expected to provide €15 million to
help the Greeks deal with the output-depressing effects of a budget
deficit clearly in excess of 15% of GDP.

The derision with
which the Greek government’s decision was greeted in certain quarters
in Greece was understandable when you remember that until recently, the
IMF was perceived in certain quarters, especially outside that country,
as a tool in the hands of imperialists and allied colonialists bent on
keeping Africa and Africans in perpetual bondage. Within the context of
the “Cold War”, this made plenty of sense. Africa is (still) home to
some of the most important mineral deposits in the world, and Western
strategists and their spooks would have been loath to have these fall
under what was then the Soviet sphere of influence. The Mobutu Sese
Sekos and Jean Bedel Bokassas were thus no accidents. Their buffoonery
was okay, so long as it guaranteed Western access to their countries’
primary resources. This was in the sixties and seventies.

Much later,
conspiracy theorists in this country, baffled by the domestic economic
crawl, and aware more than most of the tremendous potential of this
country, approached the 1980s debate over accessing the Fund’s bridging
facilities in the knowledge that it could not be a good thing. After
all, the same Western economists behind the Fund had persuaded
successive governments in the country to borrow massively against our
crude oil earnings. The heavy hand of the West was evident once again;
its agents and privies scarcely concealed themselves, and the IMF’s
nostrums were the blunt instrument with which we were to be bludgeoned
financially. In the end, this economy made the painful transition from
being under-borrowed to debt peonage, without anything to show for it,
besides the fat Swiss accounts of our leaders – elected and usurpers.
To the argument that the country was mismanaged by its indigenous
rulers, you got told that these were “comprador bourgeoisie” in cahoots
with “Western imperial circles”. Somehow, for “western imperial
circles”, Africa, and not Asia, had to be restrained from developing if
the global balance of forces was not to be disturbed. So while South
Korea, Taiwan, Malaysia, Singapore, Chile, etc. all under the heavy
hand of the West, saw material increases in net welfare, Nigeria, and
places like Indonesia saw a sad reversal of fortunes.

Cleaving to this
logic, what are we to make of Greece and its recourse to the IMF’s
bridging loan? Clearly, the Fund cannot mean thereby to under-develop
the Greek economy? The Greeks are not just Caucasians. Theirs is the
cradle of much of the West’s intellectual heritage. Unfortunately, they
share some bad habits in common with some of our best leaders on the
continent. Over the years, Greece has spent its way into trouble. Not
just spending more than it earned, but spending unsustainably. Sadly,
the €45 billion loan package might just help repay some of Greece’s due
debt, and finance its budget deficit until December.

Over the
medium-term, Greece will have to restructure: cut down on spending and
find ways of increasing its revenue stream without hampering the
outlook for output. The people will have to bear much of the cost of
any such adjustments.

Governments will
struggle to remain popular, as they define growth paths that take full
cognisance of the need to meet debt obligations as they fall due. The
IMF will of course insist on Greece meeting all its debt obligations,
and pursuing policies that place public financing on a sustainable
basis. There will be much pain, but it would not have been caused by
the Fund, or by its strong medicine. It would, instead, as with us, be
the result of inept rule by past governments in Greece.

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

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

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

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

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

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

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

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

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

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

REUTERS

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

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

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

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

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

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

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

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

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

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

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

A spokeswoman
for the Southern District also declined to comment.

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

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

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

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

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

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

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

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

© The New York Times