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The private sector
may not thrive better than 2010 at the bond market, as the Asset
Management Corporation of Nigeria (AMCON) gets set for bond issuance
this year.

It is estimated
that the Corporation will issue N3 trillion zero coupon in 10-year bond
to enable it buy up non performing loans, as part of moves by the
government to bail out the banks.

For most of 2010,
the nag had been that the Federal Government crowded out the private
sector, raising over N1 trillion. Corporates raised less than 10 per
cent of this amount.

The Nigerian Stock Exchange (NSE), in its outlook for 2011, projects that the private sector may not fare any better.

“The sustained
expansion in public borrowing risks crowding out the private sector,”
said the interim administrator of the NSE, Emmanuel Ikhazobor, in his
presentation at the press briefing on the review of 2010 and the
outlook for 2011, held on Monday in Lagos.

This sentiment is shared by Akin Oladeji, chief executive officer of Futures and Bonds Limited, a financial services firm.

“The market will
not be different from previous years since Federal Government has
devised a crafty way of raising bonds to finance its projects. Market
will continue to be crowded with FG and State Bonds. Although few
corporate bonds may enter the market, the success will depend on timing
and pricing,” Mr. Oladeji said.

“If the usual high
lending rate and low deposit rate should continue, most corporates will
consider bond issuance subject to their existing allowable debt to
equity ratio,” he added.

Dynamics in the bond market

He said AMCON will
alter the dynamics in the bond market, especially as the economy may
not be able to absorb the huge funds that will enter the system.

“Does the market
have capacity to buy all the bonds? Who will be the investors in these
bonds in an economy with so many uncertainties? I do not believe the
market has the capacity or appetite to absolve the volume of bonds
being anticipated,” he added.

Mr. Oladeji further said investors in the bond market may not enjoy the level of returns as expected.

“Rates will be
guided by demand and supply. But with intuition, it is clear that the
rate may drop if this kind of volume is taken to the market, coupled
with the facts that other type of bonds may come into the market with
attendant uncertainty.”

However, the
managing director of AMCON, Mustafa Chike-Obi, has said that the
issuance of the bonds will not overwhelm the market.

“Look at it as an
asset swap. We are taking a non productive illiquid asset and replacing
it with a somewhat liquid asset,” he said.

Briefing bank chief
executives recently in Lagos, Mr. Chike-Obi said the market will be
liquid such that banks will not be under pressure to flood the market
to sell off.

“My feeling is that banks are going to hold on to the bonds until they can make loans,” he said.

Union Bank has announced the ban of its senior staff
association. This is the aftermath of the December 15, 2010 industrial action
which crippled operations nationwide for about three days.

The bank made this known in a terse press statement release
yesterday in Lagos captioned, ‘Withdrawal of recognition of Union Bank
Association of Senior Staff (UBASS), Association of Senior Staff of Banks,
Insurance and Financial Institutions (NLC Affiliate) (ASSBIFI).’

“Following the unlawful operations of UBASS and ASSBIFI, Union
Bank of Nigeria Plc has withdrawn its recognition of the above named trade
union bodies with immediate effect. All concerned have been duly advised. The
general public should please take note,” the statement read.

The other union, National Union of Banks, Insurance and
Financial Institutions Employees (NUBIFIE), was, however, not affected by the
proscription.

Collective agreement

The 94-year old financial institution, with a workforce of over
8,000, said it will take disciplinary action against any staff that has been
found to breach the terms of their employment.

“Some staff were found to be exposing false and confidential
customer information to the public, including shareholders. In the collective
agreement, it is stated there, the dos and don’ts of members. When there is no
rule, everybody becomes lawless. We will do the proper thing. We will not
victimise anybody,” Mrs. Osibodu said, adding that 315 staff were promoted in
December, 300 staff are facing disciplinary action for various infractions,
while some have received commendation.

However, ASSBIFI, in its response, said the bank has no
constitutional basis for withdrawing recognition of the union. Its response
letter, signed by the national president, Princewill Ojeh, and secretary
general, Obukese Orere, stated that the issue of withdrawal of recognition is
null and void.

“Recognition of Trade Unions by various managements is
compulsory and automatic and not a choice or wish. Trade Unions Act No 22
chapter 437, third schedule part B (7) of 1978 as amended refers.”

According to ASSBIFI, membership of unions is guaranteed by
Section 40, 1999 Constitution on freedom of association.

“No organisation has a unilateral power to withdraw recognition
from a trade union registered under the Trade Union Act,” and urged the bank to
withdraw the proscription letter.

Union Bank gets N239b
AMCON funds

Union Bank said it has received N239 billion from the Asset
Management Corporation of Nigeria (AMCON) for the purchase of its non
performing loans in the first phase of bailout.

This is in addition to N120 billion capital injection received
from the Central Bank of Nigeria (CBN) when it intervened in 2009 following the
sack of the former managing director.

Group managing director, Funke Osibodu, at a briefing in Lagos
yesterday, said the funds may not be the final intervention as the bank would
conclude reconciliation of its accounts in the next one week. She said the bank
had a negative capital of N254 billion and would still need about N154 billion
to move up to ground zero, after which a core investor can come in.

“This N154 billion will be covered by they (AMCON) taking equity
in the bank to that level. We place this at the table, on the terms of the
equity with AMCON, they provide the money they become the shareholder
technically and then we are now at ground zero,” Mrs. Osibodu said.

She said at this point, a new core investor can come in. “The
minimum capital that may be required is N100 billion for an institution of our
size.”

She further said the bank was already talking to new core
investors. “We have a preferred core investor and we have a standby core
investor. Out of all that have indicated interest, we have narrowed down to
two. We still have to negotiate the broad terms of engagement.”

Wema Bank said it has got N15.2 billion from the Asset
Management Corporation of Nigeria (AMCON) as sales of some non-performing loan
portfolio of the bank.

“We have got 15.2 billion from AMCON, in addition to the N7.5
billion we raised from bonds last year. These we have, in addition to about 30
billion we have recovered from our non-performing loans. We have applied for
and we have obtained our licence to operate as a regional bank. We would be
operating in South South, South West, Lagos and so on,” Tunde Olofintila, the
spokesperson of the bank said in an interview yesterday.

He explained that the bank had operated domestically all along,
so it had no worries about addressing subsidiaries outside the country.

“Going regional will not affect our operations in any way,
neither will it affect our customers. There is nothing major that can be done
with a bank with international licence, national licence that we cannot do,
except clearing at the interbank market, which does not affect our customers.

“Wema bank has about 150 branches. We would close down 17
branches that we have deemed to be non-profitable, maybe due to their location
or other factors. In the areas where we want to operate, our profit margin is
high, our deposits are high, and there is federal allocation to those states
every month, which helps”.

“For our customers who patronise some of the branches that would
be unfortunately affected by our reforms, we have made provision for online
banking. They don’t need to go to the banking halls. All our customers can
reach us online and transact their businesses like nothing has changed, which
would actually be easier for them.

“We are aware that not all of our customers may follow us when
this is done, but after we have done the cost-benefit analysis, it is the best
decision for us, to operate in the region where we make profit,” he said.

He said the amount was received based on the level of
nonperforming loans in its books.

“It depends on the quantum of their delinquent loans. The money
we get from AMCON is based on the value of delinquent loans that we have. We
have recovered about N30 billion of our non-performing loans already, as at
December ending. It is a continuous process and I think we are doing well,” he
said.

At the expiration of the deadline for capital raising last year,
the Central Bank stated that Wema Bank Plc was able to raise the sum of N7.5
billion from the Special Placement Offer, approved by the Securities and
Exchange Commission (SEC), and was formally authorised during the bank’s
completion meeting, held on Tuesday, October 28, 2010, while its full
recapitalisation would depend on its receipts from AMCON.

According to the Central Bank’s guidelines, commercial banks authorised to
conduct business on a regional basis shall “maintain a minimum paid-up share
capital of N10 billion or such other amount as may be prescribed by the CBN
from time to time.”

Investors at the Nigerian Stock Exchange (NSE) on Thursday
recorded additional gains on their equities’ value, as market closed trading on
a positive note.

The Exchange market capitalisation of the 201 First-Tier
equities closed yesterday at N8.630 trillion after opening the day at N8.471
trillion, reflecting 1.87 per cent upturn or over N159 billion gains. The
market had gained N120 billion at the close of trading session on Wednesday.

Meanwhile, market watchers said the current political concerns
should not affect investors’ sentiment in the market.

Analysts at Renaissance Capital, an investment bank, said the
stock market will be resilient during the political period.

“In the past, the NSE’s performance has been resilient to
significant political and security events. Notable political events, including
the hand-over from military to civilian rule in 1999 and the first civilian
elections in 2003, did not mar the performance of the NSE.

“We believe that concerns over the political landscape have been
slightly exaggerated and may present buying opportunities,” they said.

Instead, they further said, there are great opportunities “in
all the major sectors of the NSE, including banking, consumer and building
materials and agriculture.”

High gainers

At the close of trading on Thursday, the number of gainers
closed higher at 52 stocks as against the 47 gainers recorded previous session;
while losers also closed higher at 23 stocks when compared with the 21 losers
recorded on Wednesday.

Nigerian Breweries and Dangote Cement topped the price gainers’
table with an increase of N4.14 and N3.52 respectively to close at N87.08 and
N130.02 per share. Oando Oil and Flour Mill followed in the chart with an
increase of N3.22 and N2.00, to close at N76.26 and N74.00 per share.

On the losers’ side, Total Nigeria and Nigerian Aviation
Handling Company led the price losers’ chart with a decline of N2.00 and 21
kobo, to close at N232.00 and N10.79 per share respectively. Vono Products and
Nampak Nigeria followed with a decline of 17 kobo each to close at the N3.32
and N3.85 per share.

Active subsector

The Banking subsector led the market transaction volume on
Thursday with 411.524 million units valued at N3.817 billion, as against the
492.883 million units valued at N4.706 billion recorded on Wednesday. The
volume recorded in the subsector was driven by transaction in the shares of
Zenith Bank, First Bank, Afribank, Finbank, and Oceanic Bank.

The Mortgage Companies subsector followed in the chart with
44.317 million shares worth N23.666 million. Resort Savings & Loans largely
boosted the subsector’s volume, followed by Union Homes Savings & Loans and
Aso Savings & Loans.

Trading activities in the Foreign Listings subsector was third
highest yesterday, with 34.441 million shares valued at N549.619 million.

Volume in the subsector was boosted by deals in shares of
Ecobank Transnational Incorporation, the only traded stock in the subsector
yesterday.

Research and Marketing Services (RMS), a leading marketing
research company not only in Nigeria but also within the West Africa region,
recently released a survey tagged ‘Pulse of the Nation’, which reflected the
opinions and views of Nigerians on socio- economic and political issues.

The survey is an eye opener as it revealed the desires of the
people with specific regards to governance, citizen empowerment, elections, and
leadership. It is one survey that reflects the wishes of the people for a
government to focus on delivering value to the citizenry.

The importance of such perception surveys cannot be
underestimated, especially in an environment such as ours. The survey comes as
a critical reference point in this column due to the recent decision of
government to close schools for over three weeks because of voter registration
exercise.

Even though RMS is a private entity, I think government
parastatals saddled with information and civic orientation should, on a
consistent basis, engage in public perception research to touch base with the
citizens. The recent uproar resulting from the schools’ closure bears testimony
to the fact that we do not have a listening government. A key ingredient of the
re- branding campaign is the desired need to re-tool government machinery to be
more virile and responsive to the needs of the citizens.

I find this a very commendable effort because perception is a
key and Nigerians are living up to their civic responsibilities. Some other
bodies like a group of educators went to meet the education minister while
others utilised media to publish their grievances.

It thus becomes crucial for Nigerians to embrace every channel
of communication to make their opinion and perception count on key government
policies. The media also has a critical role to play in ensuring that the
public perception and views on key issues of national discourse are given
prominent attention. The same was accorded the public outcry that greeted the
legislators pay.

Public perception should not also be taken with levity, as it
constitutes a groundswell of public opinion on issue. Gauging public perception
on a consistent basis helps in moulding and reshaping government policies for
better impact. Public perception helps the government to perform better and
focus on key parameters to provide good governance.

It thus becomes essential for government to embark on public
perception survey to assess people’s response to government policies and
initiatives. This is due to its effectiveness in evaluating the thought pattern
of the people as it enables government to focus on areas that can improve the
lot of the entire citizenry.

It has become expedient for government to attach high importance
to public perception.

This sounds strange in our clime and it should not be so. It is
high time the government do away with unpopular policies.

There should be a sustainable and consistent process to gather
opinions, feelings and views of the people. When the government fails to do
this, it meets with resistance from the people and thus reverses unpopular
decisions.

This is also a clarion call to Nigerians to shed all garments of
docility when it comes to public issues. We should also make our opinion count
and let the government listen when we talk.

Ayopo, a communication
strategist and public relations practitioner, is the chief executive of
Shortlist Limited.

The Abuja Enterprise Agency (AEA) has advised Nigerians to embrace financial literacy as a means of reducing poverty.

Bashir Muse, a
training officer with the agency, on Tuesday, said that people need to
always have good reasons for spending their income.

He said the AEA
will embark on a rally to educate the public on financial literacy, its
benefits, and how to reduce poverty among the populace.

“Being financially literate is one sure way of empowering people and
making them financially independent. Our mission is to provide
excellent support for the Federal Capital Territory residents by
developing relevant programmes and activities for starting and
nurturing business,” he said.

Shares
of insurance companies will likely attract more patronage and better
returns this year, as the industry gears up to the implementation of
the local content policy in the oil and gas industry.

The
Nigeria Content Development Act 2010, which was recently passed into
law by President Goodluck Jonathan, provides among others, for 40 per
cent, 70 per cent and 100 per cent minimum local retention in marine,
none-life and life insurance services in the Nigeria oil and gas
industry.

The
boost would come from the major plank of the Act, which requires that
all insurance risks associated with oil and gas businesses, including
prospecting, exploration, drilling, constructions, shipping,
distribution, marketing and transportation are to be insured in Nigeria
with registered Nigerian insurance underwriting companies.

This
is a strategy by the government to increase the vibrancy in the local
insurance industry and improve local capacity. Local capacity, in this
case, refers to the aggregate capacity of all Nigeria registered
insurers and reinsurers which shall be fully exhausted prior to any
application for approval to reinsure any Nigerian oil and gas risks
overseas.

Local firms are capable

Sunday
Thomas, director general of the Nigeria Insurers Association (NIA), the
umbrella organisation for all insurance companies in Nigeria, said the
industry will be greatly enhanced by the new drive.

Mr.
Thomas said the guidelines for the implementation, as recently released
by the National Insurance Commission (NAICOM), has set the tone for
improvement in the industry, adding that local firms are capable of
meeting the challenge.

“For
like four years now, the issue of local content has been on and
companies have been gearing up. Some companies have stepped up capacity
and even capital base to be able to participate,” he said.

Commissioner
for insurance, Fola Daniel, in response to enquiries on how the
commission would address the issue of implementation, said the issue of
local content as it affects the insurance industry is a long drawn
issue that cannot be responded to on phone. Mr. Daniel has, however,
been at the forefront of drafting the guideline for the implementation.

The
guideline says, “No insurance risk in the Nigerian oil and gas industry
shall be placed overseas without the written approval of the
commission, which shall ensure that Nigerian Local Capacity has been
fully exhausted.”

Mr.
Thomas said the Act would build capacity in the industry, as local
insurance companies are expected to carry the risks directly in their
books.

He
said the insurance companies listed on the Nigerian Sock Exchange would
be able to meet the dividend expectations of the shareholders:

“Ongoing
capital market reforms are expected to lead to improvement in market
and insurance shares will be more attractive to investors.”

Out
of the four indices measured by the Nigerian Stock Exchange (NSE), only
the NSE Insurance Index depreciated last year, dropping 80.67 points or
37 per cent, reflecting the decline in the prices of equities in the
sector.

“I
believe strongly that the insurance sector is going to partake
extensively in the reversal going on in the economy,” Mr. Thomas said.

Some finance
experts have stated that the inclusion of the Chinese currency, Yuan,
to the list of foreign currencies that can be used for trading and
trade settlement in the domestic foreign exchange market will reduce
the pressure of the demand for dollar in the nearest future.

Government recently
added Yuan, to the list of foreign currencies that can be used for
trade settlement in the domestic foreign exchange market, in a bid to
diversify bilateral trade away from the dollar.

“We expect forex
exposure to fluctuations in the US Dollar to be significantly reduced
as banks begin to issue Yuan accounts to their customers” Afrinvest, an
investment advisory and finance firm said.

“Given the Central
Bank‘s commitment to managing the exchange rate at the US$1.00 /
N150.00 – N151.00 band, we expect increased supply of the dollar to
meet demand at the official market” the report added.

The addition of the
Yuan brings the number of tradable currencies in Nigeria to 13, which
includes the U.S. Dollar, Euro, British Pound and Japanese Yen.
Nigerian banks are now permitted to trade in Yuan which is expected to
ease demand pressure on the dollar in the interbank market. Nigeria’s
growing and substantial trade relation with China (especially imports)
is expected to spur demand for the Yuan in the medium to long term.

“It is definite
that sizeable number of our income is coming from China, especially
since 2009. There has been an increase in the imports from Asia,
especially China. More Nigerians are now importing from there and
rather than have to be changing from one currency to the other, they
can have the currency they need directly to transact their business,”
says a banker with Finbank.

However, while some
bank officials are excited about the Yuan introduction, some are simply
indifferent. “A large part of trade is already going to China. Before,
you would have to buy in dollars and then have to change to Yuan but
now, they are saying you can have that currency at once, without having
to change before trading. It is certain that this will reduce the
demand for dollars but I do not know how it will particularly help the
foreign reserves” another banker with First Bank said.

He added that the Central Bank did not state how it is going to fund
the demand for Yuan “so for all we know, it is still going to be from
the same source , the dollars were funded.

Some operators at
the nation’s capital market have said that while the Nigerian Stock
Exchange management is planning to attract more foreign investors
through trading hour extension, it should place more priority at
protecting indigenous investors.

Emmanuel Ikazoboh,
interim administrator of the NSE, had on Monday, during a media
briefing on the 2010 market performance, said as a result of trading
extension last December, “we have an increase in the number of deals by
five per cent, an increase in traded volume by 15.6 per cent and
increase in traded value by 34.8 per cent. This justifies that we
should continue with our extended trading hours. It also shows that our
foreign investors have actually started trading and increase the volume
of our operation.” Meanwhile, David Amaechi, an executive member of the
Shareholders Association of Nigeria, said the trading extension was a
setback last year.

Mr Amaechi said,
“We should not forget that these same foreign investors that the NSE
wants to attract to the market were the ones who pulled out their funds
leaving our market to crash. These investors will take their monies
back sooner or later when they make good appreciation. But no attention
or protection is given to us who plan to stay longer in the market.”

Investors’ confidence

Tunde
Oladapo-Dixon, chief executive officer, StockPicks Consulting, a
stockbroking firm, said though it is good for the nation to have a
foreign direct investment for some capital projects, “but the capital
market authority should be encouraging indigenous investors who will
not take their monies out in a long time because the market actually is
a long time investment.” Mr Oladapo-Dixon said there is still fear that
investors’ confidence is yet to be guarded jealously in the market.

Also, analysts at
Proshare Nigeria, an investment advisory firm, said based on some
evaluations it is deductible that the initiative of trading extension
“may in the long run create a pull factor for an improvement in the
market; but for now, the extended trading hours is yet to deliver on
expectations.” They added that “the liquidity posture is yet to improve
as it closed indecisive when compared with previous period’s position.”

Harsh operating environment

In the meantime, Mr
Ikazoboh, in his appraisal of the market last year, said the harsh
operating environment led to mixed performance by listed companies as
shown in their interim and final financial reports last year.
“Declining incomes and savings attributed to rising unemployment,
weakened purchasing power arising from inflationary pressure and
investors’ apathy caused a decline in the participation of Nigerians in
the stock market,” he said.

He said the rise in interest rates especially during the fourth
quarter, profit taking and absence of margin facility exerted downward
pressure on the stock market. He added that the huge margin loans
contributed to the lull in the capital market as banks withheld funding
acquisition of equities by investors.

The federal
government has proposed a number of incentives for employers of labour
to give them the impetus to create more employment opportunities for
the large army of unemployed Nigerians.

Segun Aganga, the
minister of finance, said in Abuja that the incentives, which are part
of the responsibility of government to create the enabling environment
for the private sector to create jobs, include improving the fiscal
environment that would allow employers to invest in job creation and
human resource development.

Some of the
proposals include a legal framework for establishing an Incentive to
Create Employment (ICE) Act, to provide Personal Income Tax (PIT)
exemptions or Employer Tax Credits (ETC) to employers that employ the
services of new graduates and unemployed individuals.

Others proposals
include a New Employment Tax (NET) Relief, Work Opportunity Credit
(WOC), Rural Employers Tax (RET) Relief or Work Experience Acquisition
Programme (WEAP) Relief to help provide tax deductions under company
income tax allowance (CITA) for companies that take on new employees;
provision of additional tax concession to cover donations to certain
non-governmental organisations (NGOs) or public institutions involved
in activities such as rural development or youth empowerment.

Mr. Aganga said the
federal government’s concern about the growing challenge of
unemployment in the country, particularly among the youth, motivated it
late last year to direct the National Economic Management Team (NEMT)
to come up with a strategy for addressing the problem.

Private-sector led job creation

A NEMT committee,
led by businessman, Aliko Dangote, to prepare a private sector-led job
creation action plan for the country has since submitted its report to
government, with a recommendation for a new National Jobs Creation
Scheme with initial seed funding of N50 billion to create thousands of
jobs in the country’surban and rural communities.

“This scheme
comprises multi-faceted interventions including a Public Works
Programme across the country that will engage private sector
contractors in implementing simple, labour-intensive public works. A
local employment content requirement for all procurement contracts
submitted by ministries, departments and agencies (MDAs) to the Federal
Executive Council for approval as well as introduction of an industrial
trade-off programme,” the minister said.

This arrangement,
he pointed out, is beside government’s previous efforts to assist small
businesses to access longer term, single digit funds through a $500
million loans programme for Small Medium Enterprises (SMEs) already
initiated through the Bank of Industry (BoI).

“In our bid to
build an inclusive society, government intends to measure economic
growth not just in terms of output or Gross Domestic Product (GDP), but
also in terms of the level of job creation in the country,” he said.

The Anya O.
Anya-led expenditure review committee inaugurated in September to work
and recommend practical measures to rationalise recurrent expenditure
in the budget, Mr. Aganga said, has since submitted its initial
findings, though the deadline for the completion of its assignment was
extended to the end of the first quarter of this year.

“The quick wins
identified by the committee, composed of eminent public and private
sector professionals, have been reflected in this year’s budget, and
government intends to implement the major recommendations upon
submission of the report at the end of its assignment,” Mr. Aganga said.