Nigeria Content Online

Available economic
indices, ahead of this year’s last meeting of the Central Bank of
Nigeria’s rate-setting committee (the Monetary Policy Committee – MPC),
were not exactly pretty. Both government debt and the fiscal deficit as a
share of GDP were up and growing. Moreover, government had become the
biggest borrower in the economy, and there were signs that its
activities in the market for fixed income securities had begun to
constrict the private sector’s borrowing space.

Inflation remained a
key worry and is likely to worsen, as we head into the harmattan
season. Two things are in play with projected inflation: first,
agriculture is the main driver of domestic prices (according to our
official bean counters), and it is largely rain-fed and subsistence. So,
the dry season would cut into agric production, driving prices up.

A second price also
caused concern, as the MPC’s worthies headed for their meeting tables:
the naira’s exchange rate. Whatever the main drivers of demand are in
the foreign exchange markets (speculation, or front-loading by importers
concerned to secure supplies ahead of a potentially disruptive election
cycle), the rate at which the Central Bank was drawing down on the
external reserves to keep the official foreign exchange market supplied
is not sustainable.

In this
circumstance, what was the MPC expected to do? Tighten monetary
conditions by raising rates. There were two problems with this option.
The first was to decide which is the most important of the policy tools
available to the MPC: the policy rate or the standing facilities’
corridor.

Secondly, could
liquidity conditions in the economy support a rate increase? Or put
differently, are the banks healthy enough to help transmit any rate
movement to the economy? Remember that the CBN has had to maintain its
guarantee on interbank transactions to keep the market ticking.

Still, the biggest
unknown in predicting the MPC’s response was always political. Could the
CBN find the nerve to move rates up when its political paymasters would
rather not? A great part of the apex bank’s dilemma over the years has
been the economic nous (or lack thereof) of the managers of the fiscal
side of the economy.

The Obasanjo
administration long argued, for instance, that the main burden on the
real sector was its lack of access to bank lending. It then focused its
best efforts on holding interest rates down, while its revenue and
spending activities fed rampant increases in domestic prices. True, we
cannot forget that the CBN has both statutory and operational autonomy.
But we must also remember that it does not have as good enough a handle
on the monetary transmission mechanism as it needs to argue its corner
with the political authorities.

In the end, the CBN
performed a veritable conjurer’s trick! According to all the
post-meeting media reports, the CBN’s rate-setting committee left
interest rates unchanged. The MPC did vote to hold the monetary policy
rate (MPR) at 6.25%. But it also adjusted the corridor around the MPR to
+/- 200 basis points, “implying Standing Lending Facility (SLF) rate of
8.25%, and Standing Deposit Facility (SDF) rate of 4.25%”. The denizens
of Aso Rock may have slept better Tuesday night, persuaded that Mallam
Sanusi Lamido Sanusi was not minded to rock the economic boat faster
(and/or more violently) than the political lullabies that the country is
being asked to go to bed on.

But did nothing
really happen? Look closely at the details. Even the media reports have
cat-type phalanges poking out of the bag several paragraphs down. Every
bank treasurer that I have spoken with on this issue since Tuesday
anticipates a rise in retail rates on the back of the apex bank’s
decision to increase its standing deposit facility by 1%. What this does
is push up the opportunity cost of interbank lending. Apparently,
therefore, the key to understanding the CBN’s policy response is the
movement in the standing facilities corridor around the policy rate.

Does this then mean
that the MPR no longer matters? Or has the monetary authority given up
on the attempt to tie the policy rate to market rates? Most
commentators would argue that as a lever on the economy, the policy rate
never really mattered. Expect further tightening ahead. But do not
expect the incidence to fall on the policy rate.

The stock market opened the week on a rather bearish note that
almost threw the market off its balance. The timely bull’s response on the
fourth trading day of the week was a welcome development, as it re-affirms the
market normality. Inspite of the bull’s weak response, it successfully clears investors’
mind on reasons behind ASI drop. Although equities, especially those in the
banking sectors, became attractive and turned on complete bid, the Nigerian
Stock Exchange All Share Index (NSE ASI) is yet to recover from the bear’s
knife, as it closed low at 2.27% or 572.57 points off its opening figure, and
now stands at 24,611.56. Market capitalization of the listed equities now
stands at N7.859 trillion.

The banking stocks dominated market performance, as investors
exchanged a total of 1.11 billion units of its equities’ shares through the
week. The said volume were chiefly enhanced by volume in the shares of Zenith
Bank, that traded 185.23 million units of shares in 1,757 transactions.
Guaranty Trust Assurance, AIICO, and Law Union & Rock boosted performance
in the Insurance sector with over 47 million units of shares. Mortgage,
Information & Communication and Food/Beverages sub-sectors followed in that
order.

The 30 stocks that gained were led by Vono Products that was
moved by market forces. The stock moved up by 14.15% from N1.06 to N1.21.
University Press, Eternal Oil, and Fidelity Bank followed on gainers’ line in
that order. Meanwhile, the 61 decliners were led by Livestock, Oceanic Bank,
International Breweries, and Wema Bank that shed 16.05%, 13.95%, 13.64% and
13.33% respectively. A total of 112 stocks closed the week on a flat note.

Corporate actions for the week ended

Prestige Assurance Plc

The indemnity firm, Prestige Assurance Plc, made available its
interim Q3 unaudited results to the market. It was for the period ended
September 30, 2010. Operation wise, the firm performance was up within the
period. Driven by fairly improved claims settlement, gross premium went up by
15.81% from N2.73 billion in comparable period Q3 ‘09 to N3.16 billion.

Similarly, PAT was up by 22.09% at N573.06 million, against
N469.38 million in Q3 ‘09. Shareholders’ fund grew marginally by 9% at N4.75
billion.

Further analysis shows that Q3 EPS stands at 27 kobo, 23% growth
over 22 kobo returned in Q3 ‘09. At current market price, PE multiple of 8.15
was generated and presents Prestige attractive for medium-long term investment.
Its earning yield currently stands at 11.85%, while net profit margin of 18.15%
is slightly higher than 17.71% posted in Q3 ‘09. Returns on stakeholders’
investment on every N1.00 within the period was 12% higher than 11% in
comparable period.

Observation

Liquidity is a major challenge on the price movement of
Prestige. Possibility of dividend payment in the upcoming financial year ending
Q4 ‘10 is high here.

Eterna Oil & Gas Plc

The oil marketing, servicing, and distribution company, Eterna
Oil & Gas Plc, equally reported its Q3 unaudited results for the period
ended September 30, 2010 to the market last week. The scorecards showed
improved growth over similar period in 2009. A turnover of N11.16 billion was
posted against N6.76 billion in 2009, representing a growth of 65%. The growth
here was boosted by increase sales in fuel and gas products.

At reported profit after tax of N641.57 million, a growth of
202% was recorded against loss after tax of N627.05 million in similar period
2009. Further analysis shows that Q3 EPS now stands at 49 kobo, resulting in PE
ratio of 10.64 at current market price of N5.21. Return on capital employed
within the period was 15% on every N1.00, while profit margin stood at 5.75%.

Observation

At current ratios growth rate, Eterna Oil looks attractive for
medium-long term investment.

Report on the OTC market
for FGN Bonds

Available data from OTC FGN bonds market shows that a total
volume of 210.84 million units valued at N174.22 billion in 1,445 deals was
recorded this week, in contrast to a total of 88.7 million units worth N74.68
billion exchanged in 700 deals during the week ended Thursday, November 17,
2010.

As in the preceded week, the most active bond (measured by turnover volume)
was the 10.00% FGN July 2030 (7th FGN Bond 2030 Series 3), with a traded volume
of 78.4 million units valued at N59.51 billion in 561 deals. It was immediately
followed by 4.00% FGN April 2015 (7th FGN Bond 2015 Series 2), with a traded
volume of 58.3 million units worth N44.04 billion in 446 deals. Seventeen (17)
of the available thirty-five (35) FGN Bonds were traded during the week,
compared with nine (9) in the in the preceding week.

The internet has r e v o l u t i o n i z e d banking
andpersonal finance inmany ways and mostbank customers are familiar with online
orinternet banking services. Surprisingly however, many people even though equipped
with internet on. Whatever the reason may be that you have not yet embraced
your banks internet banking service, here are some compelling reasons to do so.
Bank at your convenience Nowadays, we are all so busy in our work lives, that
there often isn’t the time to visit the bank. With internet banking, you can
carry out most of your routine banking transactions at your convenience. As you
are not bound by the banks’ opening and closing hours and don’t have to
physically visit the bank, if you have internet access, you can check your
account balances, and manage your various accounts with a few simple clicks
from your laptop or computer, your I-pad, or even your cell phone. With this
service you can plan to pay your bills on line and on time.Most households have
routine bills to pay each month such as telephone, internet, cable television and
so on. The process of writing a cheque and sending it to the same company every
month can be inconvenient; with your online bill payment facility, you can
schedule your payments easily and save yourself valuable time.

Some service providers in environments where online banking
is widely used are able to offer better terms such as slightly higher interest
rates on savings accounts and lower service charges. This is because internet
banking is cheaper to maintain than the traditional bricks and mortar with
attendant high overheads. As with any service there are tradeoffs and it is
important to be aware of some of the pitfalls of internet banking.

Learning difficulties?

Some people avoid using internet banking services because
they find it difficult to understand, particularly some members of the older
generation who may struggle with technology issues and find it difficult to
adapt. The signing on process is usually quite simple; you are expected to
provide some form of identification, to complete a form and forward it to your
bank. Thereafter all you have to do is to simply visit the banks website and log
on to your account after establishing some security measures including a username
and password. Bank websites can sometimes be difficult to navigate at first and
some users might find them confusing and abandon them from the outset. Getting
acquainted with the banking sites softwaremay require some time and effort for
you to get comfortable. Banks must upgrade their websites periodically or may
even change them entirely, by adding new features to enhance the site. This
naturally leads to some down time as the changes are being implemented. Most
bank websites do give some guidance by providing some basic tutorials to walk
you through theprocess. Security concerns In spite of its growing popularity,
there are still many people who feel unable to trust the system. Even though
internet banking sites are usually heavily encrypted, one cannot rule out the
fact that from time to time even in the largest global banks, sophisticated “hackers”
may gain access In addition to the security that your bank will provide; it is
useful for you have. some security software on your computer to reduce the
chance of your account information being compromised. The personal touch Internet
banking can be somewhat impersonal and not everyone is ready to give up the
bank tellers’ window, or forfeit the bank manager’s smile. Some people prefer
to relate to a human being and are uncomfortable dealing with a machine. With a
brick-and-mortar bank, you are likely to have some familiarity with the bank
staff. If you are the kind of person that needs enjoy the personal touch then
you may never feel completely comfortable with virtual banking. However for
your most basic transactions such as bill paying and small transfers it still makes
sense to handle such transactions on line and then go into your b r a n c h for
the m o r e significant matters. Some institutions have developed a seamless customer
friendly service. For others sadly, you may experience appalling service,
ranging from a website that is difficult to navigate, frequent server downtime
and so on, much like the variations in customer service from bank to bank. Clearly, the whole concept of internet or online banking has its pros
and cons. If unlimited access to your bank accounts and convenience is high up on your list of banking priorities, then internet banking is ideal for you; for those who have
signed on, banking online helps them organize and manage their financial lives efficiently. For others
however, it continues to be
intimidating and complex. The truth is that the internet provides us with endless opportunities in our personal finances and it is important not to be left behind. Embrace internet banking now.

Banks shareholders
remain unsure of what becomes of their shares after the Asset
Management Corporation (AMCON) assumed the banks’ liabilities. Some of
them claim that they have not been called by the rescued banks or the
corporation on the corporation workings and procedure. But the
Corporation has assured the shareholders that they will not be wiped
out “AMCON has not spoken to any shareholders, to let us know what will
happen to shares and other issues related to it,” said Boniface Okezie,
a shareholder and leader, Progressive Shareholders Association.

“On what grounds is
AMCON taking over? Until they tell us (shareholders) that this is what
they are doing and that this is the mode they want to follow, they have
still left shareholders out. These are the things that brought
backwardness some years ago, the government taking over or managing
private institutions. The banks themselves have not come to us to say
this is how AMCON will affect us or not. If the corporation takes over
and sits on the board of banks, that is nationalization. It will not
augur well with such institutions,” Mr. Okezie added.

The banks
management are also not spared by the Central Bank. Mohammed Abdullahi,
the bank’s spokesperson said the banks are responsible for updating
their shareholders on issues regarding their shares. “The banks are to
talk to their shareholders directly, and they are talking to them
already. The shareholders are part of the discussion that the banks are
having with other people, including prospective investors, so it’s not
the Central Bank that would do that” Mr. Abdullahi disclosed.

While some of the
rescued banks claimed they have been talking with their shareholders on
the proposed workings of AMCON, others said they were not doing that
yet. “We have been talking to shareholders,” a source at Spring Bank
said. “We have already had about two meetings with them and have
explained to them about AMCON, their shares and other issues, like
recovered funds and others regarding the process”.

A source at
Intercontinental Bank said the bank would talk to its shareholders on
AMCON, when it is time to do so. “You know all these things cannot just
happen or take place like that,” he said. “Recapitalisation and the
corporation are in stages. When we get to that stage, the shareholders
must be carried along. We would definitely update them when its time,”
he added.

“Right now, AMCON
is just putting together their structures but they have said they are
not in the business to take over any bank. The want to help banks work
on their capital level so that new investors can invest in the banks.
It is certain that when it comes to the issue of recapitalisation,
shareholders would definitely be carried along” a source at Oceanic
Bank claimed.

Shareholders will benefit

Meanwhile, some
finance analysts said AMCON’s intervention is a good development
especially as it concerns shareholders’ fund. Muyiwa Oni, a research
analyst at Stanbic IBTC said the corporation will help in the valuation
of the rescued banks’ shares.

“I’ll say that the
corporation is positive for shareholders of the distressed banks,” Mr.
Oni.”The shareholders’ funds of the distressed banks are negative so we
cannot say that the corporation will put shareholders funds at risk. As
at March 2010, the total shareholders’ funds of all the distressed
banks stood at negative N1.458 trillion. On the contrary it will
preserve some value for the current shareholders.

“The negative
shareholders’ funds are a shortcoming for the shareholders and so they
will need to inject more funds if they want to maintain their holdings.
Since AMCON is bringing in capital, it will have to own a stake. This
will dilute the holdings of the shareholders significantly because of
the amount that it will invest. I think what is important to note is
that the shareholders stand to lose everything if the corporation does
not step in” he added.

David Adonri, a
stockbroker, similarly said that the corporation will benefit the
shareholders. “Without AMCON, all shareholders will lose their
investments. The intervention of corporation is a blessing because this
means their shares will still have value. It intends to cooperate with
the Central Bank to look for other investors and bring fresh funds.
When this come, the banks will come alive, and then the shareholders
wealth will now finally be secured.” “AMCON will be silent” It’s duty
is to douse nationalization concerns; its inclination is not to be a
voting shareholder in banks but protecting its investments and
participating actively with others to recapitalize the banks.

Mustafa Chike-Obi, the AMCON chief said it is not the intention of AMCON to wipe out existing shareholders.

“The truth of the
matter is that for the shareholders, the banks have negative equity but
it is not the intent of the corporation or the government, in this
case, to wipe out existing shareholders so what we will do is that we
would buy the non-performing loans first, then we would recapitalize
the banks to zero,” Mr. Chike-Obi said last week in an interview in
Abuja.

“In that process of
recapitalisation, we would have a split between AMCON and the existing
shareholders. Then we as a group would find an acquisition partner and
an M and A (Merger and Acquisition) partner, then a negotiation with
that partner would determine the final shareholding of the existing
shareholders, AMCON, and the new shareholders”.

The corporation
chief gave the assurance that shareholders will never be forced to sell
their shares in this process. “They may sell at the market if they
think the market is high enough or they can stay and be partners with
AMCON in the new recapitalised bank but they will never be forced to
sell and nobody will force them out”.

“Right now, the
rescued banks have negative capital. If they go into liquidation or
NDIC, they will be wiped out. The whole purpose of this exercise is
that we want to create some value for these rescued banks so that the
shareholders are not wiped out. We hope that by buying the NPL’s and
recapitalising these banks, there will be some value for existing
shareholders”.

Chike-Obi also said the corporation will be a silent shareholder. We
expect that negotiations between the new acquiring partners and the
banks will mostly be conducted by existing shareholders and the new
ones. AMCON is just there to help the process. We will observe and
protect our investment.”

Petrofac spends
$100 million on a 15 percent stake in Nigerian oil explorer, Seven
Energy, fulfilling the British oil and gas company’s long-term
ambitions to enter sub-Saharan Africa’s second-biggest economy.

Petrofac also has
an option to invest a further $52 million, should project milestones be
reached, bringing its interest up to 19.2 percent on a diluted basis,
while other investors have agreed to inject an additional $50 million
into Seven Energy.

“We see this as a
mutually beneficial transaction. Seven Energy has a lot of experience
in operating in Nigeria,” Petrofac’s CFO, Keith Roberts, told reporters
in a conference call.

“We’ve been
targeting for years to establish a much stronger (Nigerian) presence,
and we believe that this transaction and the broader alliance, and the
opportunity that gives us to both co-invest and co-develop with Seven
will help us progress our ambitions to develop a significant presence
in the country,” Mr. Roberts said.

Mr. Roberts noted
that the company had “significant fire power”, with a billion dollars
in cash on the balance sheet to fund any future acquisitions, but
declined to say whether the company was looking at any other specific
targets.

“Clearly, we need
to be comfortable with the opportunities, the returns, and the
associated risks. Let’s start with (this) before we think of anything
else,” he said.

Petrofac will
provide experienced personnel to help with the delivery of Seven
Energy’s key existing projects, and will be represented on its board
and management committees.

Shares in Petrofac were up 0.3 percent at 1,455 pence at 1313 GMT.

REUTERS

I am a subscriber
on the Zain network, and what I discovered during the recent name
change to Airtel informed this write-up. Its importance made me
jettison some other outlined topics.

This is an
interesting issue, as Airtel replaced Zain network over the weekend,
with several consumers unaware that they are hooked on a new network.
What has become very critical is the approach adopted in the name
change. Airtel suddenly replaced Zain, without the target consumers
gaining firsthand knowledge.

Airtel should have
garnered consumer’s attention through specific communication channels
before the eventual unveiling. It should have created a bit of
excitement amongst the consumers about the new network. When Etisalat
came in, it leveraged on a platform of registering preferred numbers
for consumers. This motivated several Nigerians to connect with the
network.

A coherent strategy
to generate massive awareness for the name change amongst consumers
would have been a potent tool to arouse the audience interest and gain
their attention. When people saw red billboards with Airtel logo, they
asked questions, and this shows limited awareness about the name change.

Identity crisis

A brand name should
also be one that appeals to the consumer. It is surprising to note that
even subscribers on the network do not know the name of their new
network. A subscriber within my office complex asked which one is
Airtel again?

The network on my
phone, as I write, still reads ‘ZAIN NG’. I learnt of the proposed buy
over of Zain months back. The period should have been utilised to
sensitise Nigerians about the new brand name, its offerings, and
benefits to them. Airtel should have developed a strategy which is
aimed at touching base with the consumers. Presently, the brand has
identity crisis with the consumers, due to the process of name change
that has resultant effects on poor network quality.

I conducted a
dipstick research on the name change in order to gauge the perception
of ZAIN subscribers. The results were very revealing, as virtually all
respondents interviewed have lost confidence in the network. Some were
unhappy they could not load recharge cards on their phone since the
name change.

The most critical
response is that quite a lot of subscribers have migrated to other
networks. It is equally important to state here that many were
surprised at the name change, as they were caught unawares.

Airtel should have
conducted a comprehensive research on the potential outcome of the name
change. This would have enabled the network gain insights about the
perception of the consumers. The brand needs to understand consumers’
perception, as this influences their behaviour. This has resulted in
the decisions of some consumers dropping the brand, prior to the name
change. Airtel would have touched base with consumers, gauge their
perception, and allay their fears about the name change through the
research. What sets Airtel apart from other networks would have been
revealed.

No structured strategy

There was no
structured communication strategy to inform the consumers about the
name change. Airtel may embark on a name change, but can it match up to
the desired image? Consumers must be able to trust the brand while they
also need to be treated with respect. It becomes difficult to change
perceptions and to transcend current stereotypes related to particular
brand images.

It is already
visible that there is consumers’ remorse. This was revealed through the
‘on the street’ dipstick research. Consumer’s remorse occurs when
changes take place after a consumer patronises a brand, which s/he
regrets later.

Now, consumers on
the network are unhappy and unsatisfied with network quality. Airtel
needs to contend for consumer’s loyalty and have consistency in service
delivery.

I was pleasantly
surprised when a story in a newspaper on November 22, credited to
Airtel chairman, read: ‘Airtel will give MTN a good fight’. My view is
that this should not be the starting point for Airtel. What this
portends is that Airtel might even be heading towards the wrong
direction. Airtel needs to fully understand the key parameters on
ground and map out strategies to remain a preferred network for its
consumers. Airtel needs to gauge the perception of subscribers on its
network and give them a reassurance that it will improve on its
offerings.

The brand needs to
gather a substantial momentum against competition. It is coming at a
time when several Nigerians perceive Etisalat as the best network.
There should be a high visible marketing and public relations
intervention to position the brand in the minds of Nigerians.

We indeed await
Airtel to showcase and leverage what is stands for to Nigerians. It is
only then we will all know we know what freedom means.

The Central Bank of
Kenya (CBK) said on Thursday it was looking to buy 5 million euros from
the local market, its second foreign currency purchase this week.

Some traders have
said the central bank’s frequent purchases of foreign currency have
kept the shilling under-priced. The bank says it is not manipulating
the shilling’s value but building foreign currency reserves.

The CBK purchased 5 million euros on Monday.

The Bank of Mauritius sold just 257 million rupees of 6.69 percent five-year government bonds at auction on Wednesday.

The central bank
had offered 2 billion rupees of the bonds maturing on June 4, 2015,
which it first sold in June this year. It received bids worth 2.8
billion rupees, but rejected most.

The bids ranged
from a yield of 6.25 percent to 7.50 percent. The highest accepted
yield was 6.84 percent, giving a weighted average yield of 6.81 percent
at the auction.

Ghana announced on
Thursday it expected first oil from its Jubilee offshore field to be
pumped on December 17, in line with earlier forecasts that it would
take its place as a major oil producer by year-end.

“First oil is expected December 17, and the government and all the
Jubilee partners are looking forward to this day,” deputy information
minister, Samuel Okudzeto Ablakwa, told Reuters.The field is operated
by UK-listed Tullow Oil.

A Nigerian firm
involved in a $2.5 billion bid for former state telecomms monopoly,
Nitel, said on Wednesday it was optimistic it would meet a December
deadline to pay a 30 percent deposit to secure its bid.

GiCell won an
extension on November 5 of 20 working days, after failing to make a
deposit of $750 million by an earlier deadline because its financial
backers had developed what it described as “cold feet” over delays in
the sale process.

GiCell is part of
the New Generation consortium, the preferred bidder for Nitel, whose
technical partners include China’s second biggest carrier, China Unicom.

“We are working
tirelessly to meet the deadline, despite the challenges we are facing,”
GiCell managing director, Usman Gumi, told Reuters.

Questions have been
raised over the financing for the New Generation bid, which some
analysts said values Nitel at more than five times what it is worth.