economic financial update january – march, 2011 · pdf fileeconomic and financial update...

Economic

&

Financial

Update

January – March, 2011

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Economic and Financial Update (First Quarter, 2011)

Sectoral Updates

The Economy in General

The Nigerian economy experienced mixed performances in the period under review, showing waves of economic indicators across major sectors. For instance, the Nigerian crude oil, which traded at the international market on the average of $98.4 per barrel in January rose sharply to $112.34 per barrel and $116.88 per barrel in February and March respectively. This was a direct fall out of the political unrest that engulfed some oil producing regions of the World, notably North Africa and Middle East. Expectedly, the hike in the prices of crude oil impacted positively on the external reserve, which notched up significantly from $33.12 billion in January, to $33.26 billion in February and $33.72 billion in March, thus representing an increase of 0.42 per cent and 1.36 per cent respectively. Similarly, the nation’s growth rate of 2010 was sustained in the first quarter of 2011, with data emerging from the National Bureau of Statistics indicating a Gross Domestic Product (GDP) growth projection of 7.43 percent as against 7.36 percent in the corresponding period in 2010. The non-oil sector remained the major driver of overall growth, with agriculture, wholesale and retail trade, and services contributing to the nation’s output significantly. With a healthy GDP, the recipe for a single digit inflation rate may lie in curtailing aggregate expenditure, fiscal prudence and revival of the ailing real sector of the economy. During the period under review, year-on-year headline inflation stood at 12.8 per cent in March, up from 11.1 per cent and 12.1 per cent in February and January respectively. However, while core inflation rose significantly to 12.8 per cent in March from to 10.6 per cent in February and up from 12.1 per cent in January, food inflation maintained a 12.2 per cent in March and February respectively from 10.3 per cent recorded in January. The rise in food inflation, consistent with the seasonal pattern can be attributed to the increase in the costs of imported food items, transportation and energy prices. On March 16th, 2011, the National Assembly passed into law the Appropriation Bill of N4.917 trillion for 2011 (with N2.467 trillion for recurrent expenditure and N1.562 for capital expenditure), as against the earlier proposed estimate of N4.221 trillion submitted by President Goodluck Jonathan in December, 2010, thus, representing an increase of N745 billion. The budget was predicated on crude oil production rate of 2.4 million barrels per day at $75/barrel, joint venture production estimate of $5.4billion, Gross Domestic Product (GDP) of 7

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percent and exchange rate of N150 to $1. As at the end of the quarter, the President had not endorsed the Appropriation Bill. This may not be unconnected with the fact that the executive believed that the legislature was ambitious in its benchmark for effecting significant increase in the budget. Following a protracted battle between the Federal government and the organised labour over the new minimum wage, President Goodluck Jonathan signed into law the new national minimum wage in March, 2011. This completed the background process necessary for the implementation of N18,000 monthly pay for Nigerian federal civil servants. The bill, having received both the Senate and House of Representatives assent on February 23 and March 2 respectively, following Presidential approval laid to rest the heated discussion created by the lingering minimum wage issue. It was last reviewed in 2000, when it was increased to N7,500 by the then President Olusegun Obasanjo. It may be recalled that both the Nigerian Labour Congress and the Trade Union Congress in February 2009 presented a demand for a N52,000 minimum wage to the Federal Government, claiming the wage (N7,500) could no longer cater for the needs of civil servants going by the prevailing economic situation.

Other Developments within the Financial Services Sector

The National Insurance Commission (NAICOM), in its 2011 guidelines for the insurance industry, directed all operators to completely disclose details of transactions above N1 million or its equivalent in the case of an individual and N5 million or its equivalent for corporate body to the Nigerian Financial Intelligence Unit (NFIU) in conformity with the provisions of the Money Laundering (Prohibition) Act, 2004. In view of this, any single cash lodgment, transaction or transfer of funds as stipulated must be reported within seven days, failure of which will attract various penalties as contained in the relevant laws. All operators shall also display in all their operation centers nationwide, the provisions of the Money Laundering (Prohibition) Act, 2004 regarding their duty to file cash transaction reports and suspicious transaction reports with Nigerian Financial Intelligence Unit (NFIU), with copies sent to NAICOM. However, where neither cash transaction in excess of the limit prescribed nor any was recorded, the operators should file a nil return to the Nigerian Financial Intelligence Unit (NFIU) and copy the commission on a monthly basis. The operators to comply with directive include the insurers, re-insurers, insurance brokers and the loss adjusters. The insurance subsector in its bid to meet the 2012 deadline for compliance with International Financial Reporting Standard (IFRS) directives, ordered insurers to start preparing two separate financial accounts. Following the directive, the underwriters and reinsurers began their transition in January 2011, while

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insurance brokers are expected to commence theirs in 2012. The Commissioner for Insurance, Mr. Fola Daniel, stated that “the commission is committed to the adoption of IFRS not only because it is one of the initiatives of the insurance industry under Financial Services Sector (FSS) 2020 programme, but also because it is an imperative for the international recognition of our insurers and reinsurers”. The adoption of the IFRS is expected to promote high quality transparent and comparable financial statements that are based on modern accounting principles and concepts being applied globally.

Money Market

During the period under review, the Central Bank of Nigeria extended the deadline given to all account holders in the 24 deposit money banks to update their accounts or stand the risk of losing access to such accounts. The extension to January 31, 2011 came following the expiration of one month initially given, which terminated on December 31, 2010. According to the apex bank, the move became expedient to consolidate on the ongoing reforms in the banking industry, sanitize the banking sector for effective service delivery and update the system’s customers’ database. The Central Bank of Nigeria (CBN), in the first quarter, increased the Monetary Policy Rate (MPR) to 7.5 percent from 6.5 percent, representing an upward review of 100 basis point. This became necessary to check an expected surge in inflation on account of the country’s general elections coming up in the second quarter. Given that this might engender a high expenditure outlay from the governments, parties and individual politician, the step was aimed at making the cost of borrowing from banks expensive, deter frivolous spending, guard the value of naira from depreciation and keep inflation in the country in checks. In the same vein, the apex bank, while maintaining the symmetric corridor at +/- 200 basis points, jerked up the cash reserve requirement ratio by 100 basis points from one percent to two percent effective February, 2011, and liquidity ratio by 500 basis points, from 25 percent to 30 percent effective March, 2011. This was informed by the effect of some fiscal, monetary and political factors on the economy. The Central Bank of Nigeria, in its new rules guiding foreign exchange (FOREX) transactions, approved the sum of $500,000 as the minimum allowable bid for each tenor by Authorized Exchange Dealers. Following this new guidelines, all forex dealers are now permitted to offer European-styled forex call and put Options Contract to their customers in the inter-bank market, subject to an approval from the CBN Banking Supervision Department to deal in the FX Operations. The guideline is aimed at ensuring that all operations by the forex

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dealers are liquid, diversified and global, while enhancing the transmission of the monetary policy and minimizing risk to the financial system. Also, the apex bank introduced penalties for banks that failed to comply with its ATM directives, following non-compliance by operators to circulars and guidelines issued in this regard. According to the CBN, where video recordings on disputed transactions cannot be provided, the ATM deployer would be made to refund the full amount involved in any ATM related fraud. Also, the penalty for bank’s failure to respond to the customer or CBN on any ATM related complaints within three days would attract a fine of N50,000 per day, until a response is received. The fine of N50,000 along with other punishment abound for various offences such as the payment card industry data security standards non-compliance; non-compliance of ATM terminals with EMV levels 1 and 2; failure to provide audit trails and journals to and fro ATM transactions. Specifically, failure to comply with the apex bank’s policy of offsite ATM deployment would attract a fine of N50,000 per week until compliance is established as well as fine of N50,000 per day for failure to establish desk contacts. In addition to this and as part of its non-monetary sanctions, the CBN would not only name the erring institution (s) at the Bankers’ Committee Forum, but will also suspend such institutions from participating in clearing operations until the infraction is rectified. The Governor of Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, was named the World Central Bank Governor for 2010 by the Global Intelligence magazine, The Banker. Mallam Sanusi won the award owing to his resolve to salvage a crumbling financial sector, coupled with implementation of series of reforms that returned Africa’s second biggest financial market (Nigeria) back to recovery. His radical anti-corruption campaign aimed at saving the 24 banks on the brink of collapse as well as securing conviction of some of their chief executives were part of the qualities that earned him the award. Others include pegging of Banks’ CEO’s tenure at a maximum of 10 years and strict disclosure of financial records in the books of deposits money banks (DMBs). The Banker, a publication of Financial Times, London is regarded as the world’s most influential financial intelligence magazine published since 1926. It provides guide to bank ratings and definitive reference in international banking for financial experts, governments, central bank governors and other decision makers.

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Capital Market

During the period under review, the Nigerian Stock Exchange (NSE) directed all stockbroking firms to separate clients’ account from its own account. This became necessary following rising cases of misappropriation of clients’ fund and the need to ensure accountability and transparency. Similarly, the Nigerian Stock Exchange (NSE) issued a new guideline for fresh listings in its stock market, directing companies seeking quotation on the NSE to appoint a stock broking firm as its intermediary. To ensure full compliance, the operators are to ensure that every aspect of the issue conforms to the listing requirement of the stock exchange and other statutory provisions in the Investments and Securities Act 2007, and Companies and Allied Matters Act, 1990. As a corollary to these directives, the NSE, will not only rationalize the prices being made on the trading floors by stockbrokers, but will also complement companies that are not performing up to expectation, conduct random evaluation and analysis, and monitor all quoted companies. Between January and March 2011, 57 member firms of the Nigerian Stock Exchange were suspended over their inability to meet up with the N70 million minimum capital base requirements, while 5 of the affected stockbroking firms later had their suspension lifted, having satisfied the requirements for recapitalization. In furtherance to this, the Securities and Exchange Commission (SEC) in an effort to benchmark its activities with emerging markets in Malaysia and South Africa, disclose its plans to reduce the number of stockbrokers from 300 to a sizeable number. It may be recalled that Securities and Exchange Commission had, in December 2005, raised the minimum shared capital of stock broking firms from N20 million to N70 million. The board of directors of the Securities and Exchange Commission (SEC) approved the appointment of Mr. Oscar Onyema as the Chief Executive Officer of the Nigerian Stock Exchange (NSE). Mr. Onyema holds a Bachelor of Science in Computer Engineering degree from Obafemi Awolowo University, Ile-Ife, Nigeria and an MBA, Finance and Investment from Ziklin School of Business, Baruch College, New York. Prior to his appointment as the CEO of Nigerian Stock Exchange, he was the Senior Vice-President and Chief Administrative Officer with the New York Stock Exchange (NYSE). A council member of Gerson Lehrman Group, Austin Texas, and a member of the Securities Traders Association of New York and Securities Industry and Financial Markets Association.

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Stock Market at a Glance Top Gainers and Losers as at March 31, 2011

Company Opening

Price (N) Closing Price

(N) Change (%) Gain (N)

Gainers Costain 5.40 5.67 5.00 0.27 AIICO 0.82 0.86 4.88 0.04 Transcorp 1.06 1.11 4.72 0.05 Continental 0.88 0.92 4.55 0.04 UACN 32.00 33.30 4.06 1.30 Unity Bank 1.24 1.29 4.03 0.05 Intercontinental Wapic

0.53 0.55 3.77 0.02

FCMB 6.62 6.86 3.63 0.24 ECOBank Transnational Inc

15.50 16.00 3.23 0.50

GT Assurance plc 1.65 1.70 3.03 0.05 Losers Loss (N) UBA 8.00 7.60 5.00 0.40 Starcomms 0.80 0.76 5.00 0.04 Goldlink 0.60 0.57 5.00 0.03 Wema Bank 1.40 1.33 5.00 0.07 NNFM 37.71 35.83 4.99 1.88 Custodian and Allied Insurance

3.21 3.05 4.98 0.16

Cadbury Nigeria 24.34 23.13 4.97 1.21 IHS Nig. Plc 3.26 3.10 4.91 0.16 Diamond Bank Nigeria Plc

6.37 6.06 4.87 0.31

Red Star Express 2.89 2.75 4.84 0.12 Source: FSDH Market Review as at March 31st, 2011

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Most Active Sectors (by Volume)

Sector Volume Traded % of Market ‘s Total Conglomerates 2,509,564,143 92.04 Banking 137,096,303 5.08 Insurance 37,505,295 1.36 Information Communication and Telecommunications

14,106,644 0.52

Food/Beverages & Tobacco 5,882,708 0.22 NB: The Conglomerates sub-sector was the most active and accounted for 92.04 per cent of total volume traded.

Source: FSDH-NSE-DOL as at March 31st, 2011

Oil & Gas

The Nigerian oil sector witnessed a major boost following the commissioning of its first Inland Modular Integrated Power, Propane and Liquefied Petroleum Gas (LPG) plant in Ebendo, Delta State. The facility has an inbuilt processing capacity of 30MMSCF intake of gas daily, and is estimated by the Oil and Gas Journal (OGJ), to have had 185 trillion cubic feet (tcf) of proven natural gas as at January, 2010 with a larger percentage wasted through flaring. It would also be generating Liquefied Petroleum Gas (LPG), Natural Gas Liquids (NGL) and condensate, High Octane Fuel Additives (HOFA), Propane and Methane, which will be useful in the production of electric power. It is, therefore, expected that with this new facility, a significant value from gas flaring will be created through the provision of clean energy and emergency electric power coupled with its economic and environmental benefits.

Energy

During the period under review, the federal government established three power projects to enhance electricity supply in the country. The power projects are expected to add about 900 megawatts of electricity to the national grid, thus increasing the current 3,313.8 megawatts, amounting to the sum of $2.1 billion (N315billion). The three sites involved in the project are Zungeru Hydro-electric power project, Kontagora as well as Gurara dams. The projects will not only generate electricity supply to the national grid, but will also be used for irrigation to support agriculture in the economy.

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Telecommunication

The Nigerian Communication Commission (NCC), extended the deadline for the SIM Card registration exercise to September 28, 2011. In effect, any subscriber who fails to register his/her SIM card before the stipulated date would have it cut off on telecommunication networks in the country. The exercise, which is aimed at reducing crimes aided by telecommunication gadgets, will also serve as a source of relevant data for planning and implementation of government programmes. It will also provide a central database for all mobile phone users in Nigeria, while disclosing their identity as well as help security agencies and the National Identity Management Commission carry out their jobs in the interest of the nation.

Agriculture

The Federal Government signed an agreement with the World Bank to boost large scale agriculture for the export market. The agreement, under the World Bank–Nigeria assisted Commercial Agriculture Development Project, will afford five states namely Lagos, Cross River, Enugu, Kano and Kaduna the opportunity to explore their agricultural endowments in generating foreign earnings for the country. Under this project, Lagos, being peculiar for its abundant water resources will focus on aquaculture, poultry and rice production; Enugu will specialize in cashew and pineapple, poultry (eggs and birds) and maize production; Cross River State will be producing oil palm, cocoa and rice; Kaduna will focus on fruit trees, dairy and maize cultivation; and Kano will channels its agricultural resources towards the production of rice, dairy and staples. It is hoped that with such collaboration with the World Bank, the project will help in addressing critical issues preventing exportation of agro products such as capacity building, mentoring, market access and linkages, with an overriding objective to ensure that finished products of value chain selected for the project achieve tremendous success at both domestic and international markets.

Macroeconomic Indicators, First Quarter, 2011

S/N

Indicators

1 MPR (%) 7.5

2 CRR (%) 2

3 Inflation Rate (%) 12.8

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4 External Reserve ($’ billion) 33.72

5 GDP (%) 7.43

6 Crude Oil ($’ bpd) 116.88

7 Exchange Rate (N/$) 151.52

8 Currency in Circulation (N’ trillion) 1.41

Source: Sundry Sources: Releases from the Monetary Policy Committee meetings of the Central Bank of Nigeria (CBN), published news stories from the Federal Office of Statistics (FOS), news reports on the international oil markets as published by the dailies and indicators from the websites of key economy regulators.

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Economic

&

Financial

Update

April-June, 2011

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Economic and Financial Update (Second Quarter, 2011)

Sectoral Updates

The Economy in General The second quarter of the year began with the general elections in April. The elections were assessed as the fairest in Nigeria’s history, because of its relative success when compared to previous elections held in the last twelve years of Nigerian democracy. Worthy of note is the fact that the success of the elections ignited immediate confidence in the economy among foreign investors, with a reassurance of increased foreign direct investment in the nation’s economy. However, this positive development had hardly been celebrated when crisis broke out and economic activities were disrupted, particularly, in some northern parts of the country, where political riots left about 800 people dead and 600 displaced. Despite the political unrest, macroeconomic indicators remained relatively stable, witnessing marginal fluctuations (Details are tabularly presented in Appendix I). The lingering crisis in the Middle East took its toll on the international market, as prices of crude oil dipped to $111.59 per barrel at the end of the quarter under review, down from $115.07 and $124.51 per barrel in May and April respectively. Also, Nigeria’s external reserve declined to $31.88billion in June from $32.08billion in May, and $32.84billion recorded in April, representing a decrease of 2.92 percent. This was, partly attributed to spending to maintain a stable naira currency, funding the power sector and the planned sovereign wealth fund. During the period under review, year-on year inflation reduced marginally to 10.2 percent, indicating a 2.2 and 1.1 percentage points decrease from 12.4 percent and 11.3 percent recorded in May and April, despite the monetary tightening policy initiated by the Central Bank of Nigeria. The rise in inflation can be attributed to the subsisting high fiscal spending, recent increases in public sector wages, the possible removal of subsidy on petroleum products and further liquidity injection due to AMCON activities. Core inflation also rose slightly to 13 percent in May from 12.9 percent in April, with a meager 0.1 percent increase. Similarly, food inflation stood at 12.2 percent in May from 11.8 percent in April, an increase of 0.6 percent points. The rise in food prices is attributed to the increased cost of imported food. Following several deliberations, the National Assembly approved the passage of the Sovereign Wealth Fund (SWF) bill and the Education Trust Fund (ETF) Amendment bill. The Sovereign Wealth Fund bill, which seeks to enforce and

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improve financial discipline in the management of Nigeria’s crude oil revenue within the approved budgetary and prudential guidelines, has been provided with an initial takeoff capital of N150 billion. The SWF is also expected to save money for future generations, provide seed financing for the much needed infrastructure, provide a stabilization fund to insulate the economy from commodity price shocks and limit Nigeria's long-term economic reliance on oil revenues. In furtherance to this, US$1.0 billion was set aside from the Excess Crude Account (ECA) as a seed fund with the expectation that high oil prices and strong production output will lead to revenue creation into the fund. The fund will also have the mandate to buy, maintain and sell any type of asset. Its affiliates will also be able to issue debt and raise money in any currency. The Education Trust Fund (ETF) Amendment bill will focus more on the funding of federal and state government owned institutions, thus enabling the institutions with an opportunity to benefit from ETF interventions, in form of grants.

Other Developments within the Financial Services Sector In its efforts to improve on the balance sheets of money deposit banks (MDBs) through the issuance of new credit facilities to its customers, the Asset Management Corporation of Nigeria (AMCON) reduced the total Non-Performing Loans (NPL) ratio across the banking sector to 5 percent. It may be recalled that prior to the establishment of AMCON two years ago, the NPL was about 50 per cent, which affected the banks’ books negatively, accounting for the acquisition of some N1 trillion non-performing loans of 22 rescued and non-rescued banks at a face value of N600 billion in the second phase of its rescue programme in the banking industry. Following the creation of an additional seat for Africa on the board of the World Bank group, a former minister of finance, Dr. Mansur Mukhtar, was appointed as an Alternate Executive Director of the bank. With this appointment, Africa now has 3 seats on the board, thus affording it the opportunity to be heard at the global body as well as being involved in the formulation and implementation of the group’s programme across Africa. After due consultations with major stakeholders in the industry, the National Pension Commission (PENCOM) agreed to increase the minimum share capital requirement of licensed Pension Fund Administrators (PFAs) from N150 million to N1billion. This new share capital requirement, which takes effect from June, 2012 will assist in adequately absorbing unforeseen losses and improve the financial conditions, as well as business processes of the PFAs, in the light of the prevailing market situation. It is also expected that this new capital requirement will enhance the quality of service delivery and product development, including capacity building & IT Infrastructure, which will be monitored by the Commission on annual basis, at the financial year end of each PFAs.

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Meanwhile, the World Bank extended the deadline given for the $30million (N4.5 billion) Micro Small and Medium Enterprises (MSMEs) project in Nigeria from June, 2011 to December, 2011. The MSMEs project, which is a pilot programme signed between Nigeria and the World Bank between 2005 and 2011, is designed to improve the performances and employment levels of MSMEs in selected non-oil sub-sectors within three states of the federation. Its primary objective is to achieve increased private sector investment for MSMEs development by demonstrating how a combination of investment climate reforms, improved access to finance and business development services can transform the rate of growth of MSMEs in Nigeria. It is also aimed at improving the business investment environment through policy reform and promoting Public Private Partnership (PPP), thus ensuring that MSMEs are able to reap the benefits of the project even after its completion.

Money Market

In the Central Bank of Nigeria’s efforts to address the inflationary expectations associated with excess liquidity in the system, it jerked up the monetary policy rate (MPR) by 50 basis points from 7.5 percent to 8 percent, and the cash reserve ratio (CRR) by 200 basis points from 2 percent to 4 per cent. The increase in the MPR, which is the third in 2011, implies that bank borrowers will have to pay more on loans, while the pressure on foreign exchange demand will be reduced to its minimum. The Central Bank of Nigeria, in a bid to ensure proper monitoring of activities carried out by microfinance banks (MFBs) operating in the country, categorized the MFBs into Unit, State, and National Microfinance banks. Under the new classification, microfinance banks that fall under the Unit, State and National category are required to have a minimum paid-up capital of N20 million, N100 million and N2 billion respectively. These prescribed capitalisation levels would be reviewed from time-to-time, as deemed necessary. Also subject to prior written approval by the CBN, a unit microfinance bank is authorized to operate at only one location and is prohibited from having branches or cash centers; a state microfinance bank is authorized to operate within a state or the FCT and is allowed to open branches within the same state or FCT; while a national microfinance bank is authorized to operate in more than one state, including the FCT, and is allowed to open branches in all states of the federation. Any microfinance bank intending to transform to another category must first surrender its current operating license before obtaining a new one. Among other responsibilities, this policy assigns the government the task of setting aside an amount, not less than 1 percent of the annual budget of federal, state & local governments for microcredit schemes.

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The apex bank extended the deadline for banks to fully comply with the 10-digit Nigerian Uniform Bank Account Number (NUBAN) from June 1, 2011 to June, 2012. In furtherance to this, the CBN rolled-out modalities that would guarantee smooth transition to the policy by the deposit money banks (DMBs). Some of the modalities are the Check Digit Algorithm and the need to inform customers of their new account numbers as soon as it has been changed. According to the apex bank, the approved NUBAN format will be ABC-DEFGHIJKL-M, where ABC is the 3 digit bank code assigned by the CBN; DEFGHIJKL is the NUBAN account serial number; and M is the NUBAN check digit required for account verification. The NUBAN scheme is expected to resolve problems associated with electronic payments in Nigeria, as many of them emanate from specification of wrong beneficiary account numbers. Within the period under review, the CBN issued a new cash withdrawal/deposit limit for account holders in the 24 deposit money banks (DMBs). To this effect, daily withdrawals/deposits will be limited to N150,000 for individuals and N1,000,000 for corporate organizations. However, any withdrawal/deposit in excess of these specified amounts will attract a fine of N100 per extra N1,000 for individuals and N200 per extra N1,000 for legal entities. More so, any deposit money bank found contravening this policy would be fined five times the amount the bank waived as a first offender, and will subsequently pay ten times the charges waived. Also, the encashment of Third Party cheques above N150,000 across the counter would attract a sanction of 10 percent of the face value or N100,000, whichever is higher on the bank. As such, June 1, 2012 was set as deadline for DMBs to conform to this policy, with a pilot scheme being planned for Lagos in December, 2011, before further implementation in Abuja, Port Harcourt, Kano and Aba, which will require the deployment of new 400,000 Automated Teller Machines (ATM) and Points of Sales (POS) in major supermarkets, airlines, hospitals and hotels, among other commercial places to facilitate effective implementation. As part of Know Your Customer (KYC) initiative, the CBN mandated all banks in the country to henceforth, request for valid means of identification from beneficiaries of cheque and depositors of cash, within certain limits. To this end, identification will be required for N1 million and above from or into individual accounts, N5 million and above from or into corporate accounts, and transactions of USD 10,000 or its equivalent in other currencies. This is a collaborative effort between the Economic and Financial Crimes Commission (EFCC) and the United Nations office on drug and crimes (UNODC), to combat money laundering and terrorism financing activities. Prior to this directive, no means of identification were required from depositors of cash in Nigerian banks.

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Also, the apex bank under the new banking model, granted seventeen of the Deposit Money Banks (DMBs) operational licenses to operate either as international, national or regional bank. Of these, nine banks were granted license to operate beyond Nigeria’s border, six were granted national banking license, while two will operate as regional banks. The banks granted international operating license are: Access Bank, GTBank, Diamond Bank, Skye Bank, Zenith Bank, Fidelity Bank, UBA, FCMB and First Bank of Nigeria; while Citibank, Ecobank, Standard chartered bank, sterling bank, unity bank and Stanbic IBTC will operate as national commercial banks; ETB and Wema Bank are the only two granted the regional banking licenses. However, licenses to the eight distressed banks would be announced upon completion of the ongoing negotiations for their recapitalization. The CBN issued a new set of assessment criteria for the employment of top management officials of banks, discount houses and other financial institutions to assess capacity as “fit and proper” for the position for which they are being considered. With the new criteria, the qualifications for Managing Directors and Executive Directors must include a minimum of first degree or its equivalent in any discipline and minimum of fifteen years post qualification experience, out of which ten must be in management and leadership positions. Non-Executive Directors are required to have a first degree or its equivalent in any discipline, proven skills and competencies in the fields of nominees, and knowledge of the operators of banks/discount houses and relevant laws and regulations guiding the financial services industry, amongst others. In addition, the non-Executive Directors’ candidate would undergo training at their institutions’ expense, with a view to acquiring the prerequisite knowledge about their responsibilities and duties. The financial services sector, particularly the banking sub-sector, received a shock in the month of June, 2011 with the death of the Managing Director/CEO of GT Bank, Mr. Olutayo Aderinokun on June 14, 2011. He co-founded GTBank in 1990 and served as Deputy Managing Director to the then Managing Director/CEO, Mr Fola Adeola for 12 years before he subsequently became the bank’s Managing Director/CEO and held the position until his death. Under his leadership, the bank witnessed tremendous growth and was recognized as an industry leader in the local and international arena.

Capital Market

The board of directors of the Securities and Exchange Commission (SEC) approved the appointment of Adeolu Bajomo, as the new Executive Director, Marketing Operations and Information Technology (MOIT) of the Nigerian Stock Exchange (NSE). Prior to his appointment, he had held several director level/leadership positions in the financial services sector. It may be recalled that

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the appointment of a substantive CEO and executive director for the Exchange was part of the transformational agenda put in place by the Securities and Exchange Commission (SEC), following its intervention in the management of the Nigerian Stock Exchange (NSE) in August 2010. Also, the management of the NSE inaugurated new council members to oversee the operations of the exchange after the exit of the interim administrator. The council members include the MD, Shell Nigeria Closed Pension Fund Administration Limited, Mrs. Yemisi Ayeni; MD, Aso Savings and Loans Plc, Mr. Hassan Usman; Partner, Dikko and Mahmoud Solicitor and Advocates, Mr. Abubakar Mahmoud; MD, Financial Derivatives Company Ltd, Mr. Bismarck Rewan; and Principal Partner, Dorothy Uffot. The Nigerian Stock Exchange introduced new rules guiding transactions in large volumes and block divestment of listed companies by stockbrokers. In line with the new rules, brokers are to seek formal approval, supported with mandates from both the buyers and the sellers. In addition, the board can determine the seller(s) or company authorizing such transaction, while the stockbroker must keep the Exchange informed on the prospective direct and indirect holdings post-divestment among others. The Exchange will also require the transacting parties to make proper documentation of their Form CO2 and CO7 with the Corporate Affairs Commission (CAC). Where banks or insurance companies are involved, their respective regulatory authorities will be notified, and the NSE will notify the SEC within 24 hours.

Stock Market at a Glance Top Gainers and Losers as at June 30, 2011

Company Opening



Gainers Cap Hotel 3.20 3.36 5 0.16 Julius Berger 59.30 62.26 4.99 2.96 CAP Plc 32.50 34.12 4.98 1.62 Champion 4.05 4.25 4.94 0.20 Zenith Bank 14.11 14.66 3.90 0.55 AIICO Insurance 0.78 0.81 3.85 0.03 Wapic Insurance 0.53 0.55 3.77 0.02 Law union Assurance 0.54 0.56 3.70 0.02 UAC-Prop 19.30 20.00 3.63 0.70 BAGCO 2.45 2.52 2.86 0.07 Losers Loss (N)

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Oando 45.05 42.80 4.99 2.25 Forte Oil 20.29 19.28 4.98 1.01

Company Opening Price (N)

Closing Price (N)

Change (%) Gain (N)

Vono Foam 3.03 2.88 4.95 0.15 First Inland Bank 0.61 0.58 4.92 0.03 May& Baker 3.89 3.70 4.88 0.19 Abbey Buildings 1.44 1.37 4.86 0.07 Oceanic Bank 1.50 1.43 4.67 0.07 Red Starex 2.79 2.66 4.66 0.13 Costain 2.58 2.46 4.65 0.12 Transcorp 1.08 1.03 4.63 0.05 Source: Business Day Newspaper as at June 30th, 2011, CSCS Ltd

Most Active Sectors (by Volume)

Sector Volume Traded % of Market ‘s Total Conglomerates 171,212,036 41.90 Banking 134,770,600 32.98 Insurance 41,434,481 10.14 Information Communication and Telecommunications

17,419,738 4.26

Food/Beverages & Tobacco 10,155,700 2.49 NB: The Conglomerates sub-sector was the most active and accounted for 41.90 per cent of total volume traded.

Source: FSDH-NSE-DOL as at June 30th, 2011

Oil & Gas

Within the period under review, the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), recorded a remarkable achievement in the production of crude oil, raising its daily production of 60,000 barrels per day (bpd) to 102,000 barrels per day (bpd). This was made possible with the support of the Federal Government through its transformation and growth strategy, aimed at repositioning the company in the next five years. The repositioning exercise is designed to increase both the NPDC reserves and the production base to over 1.5 billion barrels and 250,000 barrels of oil per day respectively, by 2015. This strategy is imperative, particularly in the

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upstream sector, as it will help in providing national energy security to the country.

Energy The Niger Delta Power Holding Company Limited (NDPHC) commissioned its Katampe 330/132kv transmission sub-station in Abuja. The Katampe sub-station project, which consists of a 1*150MVA, 330/132/33 KV power transformer, 1*330 transformer bay, 1*132KV transformer bay, 1*300 kVA, 33KV and earthling transformer, is expected to enhance electricity supply to Abuja and its environs as well as effectively increase the capacity available to Abuja from 300MVA to 450 MVA.

Telecommunication

The Nigerian Communications Commission released new guideline for Short Code Operations in the country. With this guideline, short codes for emergency services must be free and without charges to the consumers. Also all operators are required to issue a uniform code to government agencies dealing in security issues and intelligence matters. While all other categories of short codes will be classified as premium, the operator in conjunction with the service provider will determine applicable fees and charges. Short codes are special telephone numbers, which are shorter than the full telephone numbers that can be used to address Short Message Service (SMS) and Multimedia Messaging Service (MMS) messages from mobile phone of fixed wireless. They are widely used for value added services, such as television voting, ordering ring tones, charity donations, among others. According to the Commission, the primary objective is to establish a standard practice for providers of short code services and to provide a framework for provision of these services. It further reiterated that it may constitute an industry group to regulate activities of short codes, including monitoring, compliance and enforcement of these guidelines.

Agriculture The CBN under its Commercial Agriculture Credit Scheme (CACS), expended a total of N133.11billion to 139 beneficiaries, made up of 115 individuals, private promoters and 24 state governments, with each accessing N1billion each. These funds are intended to complement other special initiatives of the CBN in providing concessionary funding for agriculture. State governments and the Federal Capital Territory also borrow from the fund for on-lending to farmers, and so far, 24 states and 13 Deposit Money Banks are already participating under the scheme. The CACS, which has since its inception in 2009 paid out N133.11billion, was established as part of the federal government’s efforts aimed at promoting commercial agricultural enterprises and the development of the agricultural sector in the Nigerian economy.

20

Meanwhile, the Bankers Committee reviewed the rate at which deposit money banks (DMBs) could make credit facilities available to the agricultural sector from their banks’ total loan portfolio upwards from 1 percent to 2 percent. The move was necessitated by the contribution of the agricultural sector to the nation’s GDP, and the need to sustain adequate food supply in the country. As a corollary to this, banks have resolved to establish agriculture desks that will be manned by skilled employees, with sound knowledge in agricultural lending.

APPENDIX I

Macroeconomic Indicators, Second Quarter, 2011

S/N

Indicators

Q1

Q2

1 MPR (%) 7.5 8

2 CRR (%) 2 4

3 Inflation Rate (%) 12.8 10.2

4 External Reserve ($’ billion) 33.72 31.88

5 GDP (%) 7.43 (Projected)

6.43

6 Crude Oil ($’ bpd) 116.88 111.59

7 Exchange Rate (N/$) 151.52 151.29

8 Currency in Circulation (N’billion) 1.41 1.35


21

Economic

&

Financial

Update

July – September, 2011

Economic and Financial Update (Third Quarter, 2011)

22

Sectoral Updates


During the third quarter of 2011, the Nigerian economy witnessed series of economic reforms initiated to emplace strong economic fundamentals for transforming the economy. Unfortunately, these reform efforts intended to significantly improve macroeconomic outcomes were marred by the nefarious activities of the Boko Haram Sect, which led to the bombing of the Police Headquarters and the United Nations building in Abuja, amongst others, leaving 23 persons dead, out of which 11 were United Nation’s personnel. This unwholesome act contributed to the nation’s dwindling resources, as potential and existing investors became apprehensive and uncertain about the state of the nation’s insecurity, which seem to have resulted in panic withdrawal and divestment as well as de-industrialization.

The outcome of these and other activities took its toll on the nation’s Gross Domestic Product (GDP), which declined to 7.4 percent in the quarter under review, from 7.7 percent in the preceding quarter. The oil sector also witnessed negative growth within the period, with international oil prices closing at $105.4 per barrel, from $120.6 per barrel and $109.9 per barrel in July and August respectively. The effect of this downward trend impacted negatively on Nigeria’s foreign reserve, as it declined marginally to $31.74billion at the end of third quarter, from $32.51 billion and $32.92 billion recorded in the month of July and August, representing a decline of 2.34 per cent and 3.58 per cent respectively. However, the non-oil sector remained the major driver of overall growth, with wholesale/retail trade, telecommunications, manufacturing, finance and insurance sectors contributing significantly to the nations’ output.

Meanwhile, Nigeria’s inflation rose to 10.3 per cent in September from 9.3 percent and 10.2 percent in August and July respectively, beating the CBN single-digit target. Also, food prices, the largest contributor to the consumer index, maintained an upward movement as it rose by 9.5 per cent year-on-year in September from 8.7 per cent in August and 7.9 percent in July. During this period, the biggest contributors to the consumer inflation were the high prices of electricity and food items, especially, the increasing costs of yam, cooking oil and fish.

In a bid to ensure a unified database of Nigerian citizens from 18 years and above, the Federal Executive Council (FEC) approved the sum of N30 billion for the first phase of a new national identity scheme for the country, otherwise known as the Integrated National Identity Management System (INIMS). One of the major objectives of this project is to simplify the existing process that will

23

afford different government agencies the opportunity to capture citizens’ data separately for their individual use, in a way that would ensure cost reduction, while carrying out their individual registration processes.

Other Developments within the Financial Services Sector The National Pension Commission (PENCOM) directed all Pension Fund Administrators (PFAs) managing N100 billion and above on behalf of its contributors to create at least, 11 departments to facilitate its operations. The departments to be established include: Contributors/Collectors, Investment, Benefit Administration, Business Development/Relationship Management, Finance, IT, Compliance, Risk Management, Internal Audit, Administration/Human Resources and Legal/Company Secretary. Following this directive, the Commission issued various guidelines and policy directives to its stakeholders to ensure full compliance with the new scheme and provide opportunities to help the informal sector thrive. In an effort to fast-track the development of the Islamic non-interest banking model in Nigeria, the federal government inaugurated a committee made up of the Central Bank of Nigeria (CBN), Infrastructure Concession Regulatory Commission (ICRC), Securities and Exchange Commission (SEC), Debt Management Office (DMO), Lotus Capital and Jaiz International Plc. The committee was inaugurated to develop an alternative finance model for infrastructure development under the Islamic banking model, with international bond market within the Sukuk framework. The Sukuks represent certificates of proportional and individual ownership right in tangible assets in line with the principle of Islamic finance, where interest is not paid, but rather returns are generated through actual transactions.

Money Market During the period under review, the Central Bank of Nigeria (CBN) approved the inclusion of Renminbi (Yuan) in the country’s external reserve mix. The approval, which followed the signing of a Memorandum of Association (MOU) with the Chinese Financial Regulatory Authority, was done with a view to strengthen alliances between the monetary authorities of the two countries, as well as build strategic and mutually beneficial relationships with major Chinese financial institutions. It may be recalled that prior to this initiative, the country’s external currency mix consisted of the United States dollars, the Euro and the British Pound Sterling.

Following series of unusual developments in the global and domestic economy, which impacted negatively on domestic liquidity conditions, the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR) by 275 basis points (bps) from 9.25 percent to 12 per cent, while maintaining the current symmetric corridor of +/-200 basis points around the MPR. The increase, which is the sixth

24

in a series this year, and the second in the quarter under review, is aimed at tightening liquidity and achieving price stability. Similarly, the CBN raised the cash reserve ratio (CRR) to 8 percent from 4 percent, while suspending the reserve averaging method for computing CRR in favor of daily maintenance. Also, banks’ Net Open Positions (NOP) was reduced from five percent to one per cent of shareholder funds.

As part of measures to achieve a cashless economy in Nigeria, the CBN awarded certificates of full registration to a Cash in Transit (CIT) and Cash Sorting companies. The companies are the Integrated Cash Management Systems Limited and Bankers Warehouse Limited. The paid-up capital requirement for CIT companies is N1billlion and N3 billion for currency sorting companies, while a total of N4 billion is required to operate both as a CIT and currency sorting firm. However, existing companies that have not met the registration requirements, especially the required capital base were advised to explore other financing options. It is expected that the registration of companies providing services in the cash sub-sector will not only enhance the efficiency of currency management in Nigeria, but will also facilitate the generation of fit naira note for payment, engender healthy competition among service providers; and ensure product quality, integrity and standardization. This is the first time service companies providing services in the cash service sub-sector of the Nigerian banking sector will be registered and brought under the supervisory and regulatory framework of the CBN. This requirement would allow more companies qualify for registration, as the policy is not only consistent with, but complementary to the cash policy guidelines of the CBN. Also, the apex bank issued December 31, 2012 as the deadline for compliance with the point of sale (POS) standards issued in a circular titled, ”Guidelines on POS Card Acceptance”. According to the circular, under no circumstances shall a merchant charge a surcharge to customers for using their cards, as fees and charges would be applicable to only POS transactions performed with naira denominated cards. Hence, fees charged at POS terminal transaction will be reviewed annually and distributed as follows; issue- 3percent; Acquirer- 32.5percent; Payment Terminal Owner- 25 percent; Local Switch- 5 percent and Payment Terminal Service Aggregator- 7.5 percent. Furthermore, any operator, processor, infrastructure provider, switching company, service provider or bank that contravenes this policy faces a minimum of one month suspension by the CBN, with stricter sanctions if the practice persists.

Also, during the period under review, the federal government through the Nigeria Deposit Insurance Corporation (NDIC) assumed ownership of Afribank, Bank PHB and Spring Bank via the “Bridge Bank” mechanism, following revocation of their licenses by the Central Bank of Nigeria (CBN). This means the three banks will still be open to customers and continue to operate normally

25

under the control of three bridge banks created by the NDIC to assume their assets. The Bridge Banks are Enterprise Bank Limited to assume assets of Spring Bank, Keystone Bank Limited to assume assets of Bank PHB, and MainStreet Bank Limited to assume assets of Afribank. In furtherance to this, the CBN reconstituted a new board for the affected banks and they are Mrs. Faith Tuedor-Mathew as the Managing Director, and Mr. Falalu Bello as Chairman, Main street Bank Limited; Messrs. Jacobs Moyo Ajekigbe and Oti Ikomi as its Chairman and Managing Director for Keystone Bank Limited; while Mr. Emeka Onwuka and Mr. Ahmed Kuru as Chairman and Managing Director, Entreprise Bank Limited. The boards of the three nationalized banks were entrusted with the mandate to manage these banks along best commercial practice to compete effectively in the Nigerian banking sector and render quality service to customers. Meanwhile, the depositors of these banks had been assured of the safety of their money by the Asset Management Corporation of Nigeria (AMCON), while employees were also assured of seamless continuity of business operations and job functions. A bridge bank is a temporary bank organized by the regulators to administer the deposits and liabilities of a failed bank. Bridge banks must be chartered as national banks. By implication, they are required to honour the commitments of the failed bank to its customers, and not to interrupt or terminate adequately secured loans. They are also authorized to seek to liquidate failed banks, either by finding buyers for the bank as a going concern or by liquidating its portfolio of assets within two years, which can be extended for cause by an additional year.

The Central Bank of Nigeria (CBN) approved a revised microfinance supervisory and regulatory framework for Nigeria. Under this framework, micro-finance Banks (MFB) will be categorized into three according to the minimum paid-up capital required in order to ensure financial stability in the sector. The first category will consist of those authorized to operate in one location with a minimum paid-up capital of N20 million; the second category of MFBs are to operate within one state or the Federal Capital Territory (FCT), with a minimum paid up-capital of N100 million and are allowed to open branches or cash centres within the same state; while the third category is to have a paid-up capital of N2billion, and will be allowed to open branches in any part of the country. However, beyond the attainment of the revised capital requirement, operationalisation of the framework by MFB is still subject to CBN’s ratification.

Capital Market

The Securities and Exchange Commission (SEC) in an effort to begin the demutualization of the operations of Nigerian Stock Exchange (NSE), approved the formation of a Demutualization Committee. The Committee, which was charged with the responsibility of making recommendations for the demutualization of the NSE activities, was formed at the 61st SEC Board Meeting.

26

Stock Market at a Glance Top Gainers and Losers as at September 30, 2011

Company Opening



Gainers CAP 17.00 17.85 5.00 0.85 Ashaka Cement 16.00 16.80 5.00 0.80 NAHCO 5.60 5.88 5.00 0.28 Sterling Bank 1.20 1.26 5.00 0.06 NB 76.18 79.98 4.99 3.80 Ecobank 2.41 2.53 4.98 0.12 RT Briscoe 1.41 1.48 4.96 0.07 Berger 8.92 9.36 4.93 0.44 Dangote Flour 6.49 6.81 4.93 0.32 UBA 3.69 3.87 4.88 0.18 Losers Loss (N) AIICO 0.60 0.57 5.00 0.03 VANLEER 13.97 13.28 4.94 0.69 Flourmill 62.56 59.55 4.81 3.01 MayBaker 3.05 3.00 1.64 0.05 Diamond Bank 3.55 3.50 1.41 0.05 Unity Bank 0.76 0.75 1.32 0.01 Continsure 1.03 1.02 0.97 0.01 Presco 7.05 7.00 0.71 0.05 Fidelity Bank 2.02 2.01 0.50 0.01 Skye Bank 5.11 5.10 0.20 0.01 Source: NSE Daily Summary (Equities) as at September 30th, 2011.

Energy Owing to the regulated price of electricity in the country and the inability to meet repayment terms by companies buying power from independent power generating companies, the federal government approved the board of the Nigerian Bulk Electricity Trading (NEBT) Plc. The NEBT board, which is to be

27

chaired by the Minister of Finance and Coordinator of the economy, Dr. Ngozi Okonjo-Iweala, was created by the National Electricity Sector Reform Act 2005 to recoup investments by distribution companies, and this has generally been perceived as the biggest risk to growth in the power sector. The PHCN, which hitherto managed the process, owed huge debts from previous power purchase agreement (PPAs) it had signed with independent producers. Following the approval, NEBT, will henceforth honour current PPAs signed by PHCN and take over the negotiation and signing of future power purchase contracts for distribution companies, thereby boosting potential investors’ confidence. The power sector witnessed a major boost, following the attainment of a 4,242.7 megawatts (MW) power generation, with 3982MW going into national grid and 260MW for the maintenance of the spinning reserve for system stability. The feat, which marked an all-time-high power generation in the country, is coming on the heels of massive reduction in the incidence of system collapse in the power sector. It may be recalled that the highest the government was able to achieve prior to this, was 3800MW. Meanwhile, the Federal Government terminated the appointments of the Chief Executive Officers of four electricity distribution companies, namely Eko, Ibadan, Benin and Jos distribution companies. The move was necessitated by the need to ensure a successful implementation of the power sector reform. They were replaced by Mr. Oladele Amoda (Eko); Mr. Bolaji Oyesiku (Ibadan); Dr. Effiong Umoren (Benin) and Mrs. Vera Osuhor (Jos). They are expected to ensure effective network operations and revenue collection. The Federal Government increased electricity consumption tariff from N8.50/kilowatt to N10/kilowatt, the second time within a year. This became necessary in order to attract private investors. However, it is believed that raising the electricity tariff without corresponding increase in power supply will pose an enormous burden to the citizens of the country, more so because other alternative energy sources such as kerosene, diesel and cooking gas are also increasing, scarce and costing much more.

Telecommunication The Nigerian Communication Commission (NCC), has for the umpteenth time extended, the Subscriber Identification Mode (SIM) card registration period owing to calls from stakeholders and subscribers clamouring for the extension of the deadline. The extension was considered needful, as a result of logistic challenges experienced by over 40 million subscribers who were yet to register the SIM, while the Commission declared that any unregistered SIM card would be immediately disconnected upon expiration of this extension. Meanwhile, NCC has disclosed that harmonization process would begin without delay. This

28

process involves collation, reconciliation, clearing and consolidation of the captured data into a central data infrastructure for efficient subscribers’ database management.

Macroeconomic Indicators, Third Quarter, 2011

S/N

Indicators

1 MPR (%) 12

2 CRR (%) 8



5 GDP (%) 7.4





29

Economic

&

Financial

Update

October – December, 2011

30

Economic and Financial Update (Fourth Quarter, 2011)

Sectoral Updates


In the fourth quarter of 2011, the Nigerian economy witnessed a devastating period in history, as it had to grapple with the effect of the increasing spate of insecurity in the country, in the face of economic reforms. The lingering crisis, which began in the northern part of the country, following the general elections in April, drew the attention of the international community who likened the crisis to that occurring in the Middle-East. Unfortunately, this situation impacted negatively on economic activities as government focused more attention on restoring peace in these troubled spots, rather than pursuing and implementing policies that will entrench economic growth. The level of political uncertainty and instability created by this imbroglio compelled the United Nations (UN) to move an economic conference earlier scheduled to hold in Nigeria to another African country. It is hoped that the federal government will do all that is necessary to bring the warring groups to the table and devise an amicable means of putting off the civil unrest in the far north. However, these developments did not impair economic growth as the nation’s output (GDP) grew marginally to 7.68 percent up from 7.4 percent recorded in the previous period, because of a stronger performance in the non-oil sector, particularly telecommunications, building and construction, hotel and restaurant services. Meanwhile, the oil sector witnessed unprecedented levels of disruption compared to recent times due to temporary shutdown of facilities such as at Bonga, a 200,000 barrel per day facility, which supplies close to 10 per cent of Nigeria’s total crude output. Despite the shortfall, the sector benefited immensely from the international crude oil market price, as it traded at the international market on the average at $93.36 per barrel in October to $99.37 in November and closed at $100.45 in December. The increment caused an improvement in the nation’s external reserve to $32.98billion at the end of the quarter under review, up from $32.64billion reported in the preceding period. Similarly, headline inflation experienced a wavy flow in the period being reported, as it posted an upward movement of 10.5 percent in October, which was sustained in November, but later fell to 10.3 percent in December. These developments can be attributed to the upward and downward movement in the prices of food items as well as the increase in the prices of kerosene across the country.

31

The Federal Government inaugurated a new task team to implement the recommendation of the Prof. Pai Obanya led reform committee of the Presidential Task Team on Education (PTTE). The team was to be headed by the Minister of Education, Professor Ruqayatu Rufai and the Minister of State, Chief Nyesom Wike as Chairman and Vice Chairman respectively. President Goodluck Jonathan inaugurated a new board for the Niger Delta Development Commission (NDDC). The new members include: Dr. Tarilah Tepebah, Chairman; Dr. Christian A. Obo, Managing Director; Mr. L.E.J Konbye, Executive Director, Finance and Accounts; Edikan Eshett, Executive Director, Projects. Other members are Mr. Edward Orubo, Dr. Ibitamuno Aminigo, Chief Solomon Ogba, Imaobong Johnson, Aloysius Nwagboso, and Minister of state for Finance, Minister of Environment, amongst others. The new board members, who are to serve from the tenure of the board earlier dissolved in September, 2011, were charged with the responsibility of embarking on projects and programmes that would engender positive transformation of the Niger Delta. Also, President Goodluck Jonathan presented a N4.749 trillion budget proposal to the National Assembly, with a promise to offer zero – duty on importation of power and agricultural equipment as from fiscal consolidation, with economic growth and job creation inclusive. The 2012 budget proposal reflects a modest increase of six per cent above the N4.484 trillion appropriated for the 2011 fiscal year, and a capital share of about 28 per cent of total expenditure, against 26 per cent in the previous year, while the allocation for recurrent expenditure for 2012 is 72 per cent, down from 74.4 per cent in 2011. With the commencement of the CBN’s cashless economy initiative, the Nigeria Postal Service (NIPOST) announced its partnership with eTranzact International Plc. to ensure successful implementation of the policy across the country. According to NIPOST, the partnership is expected to bring e-payment services to Nigerians, while positioning it as a financial institution that will deliver qualitative e-payment services to Nigerians.

Other Developments within the Financial Services Sector

Money Market

In the period under review, the Central Bank of Nigeria (CBN) introduced new guidelines for cheque truncation in the country. The guideline is in fulfillment of Section 47 of the CBN Act No. 7, of 2007, by which the CBN is charged with the duty of facilitating the clearing of cheques, credit instruments for banks and for this purpose, to organize in conjunction with other banks, clearing houses as may

32

be considered necessary. According to the apex bank, the process is expected to reduce cost and the number of days required for clearing, articulate the rights and responsibilities of presenting and paying banks, while facilitating the implementation of an effective and efficient payment system in the sector. Also, the apex bank reviewed upward the Monetary Policy Rate (MPR) by 275 basis points from 9.25 per cent to 12 per cent, and the Cash Reserve Ratio (CRR) from 4 per cent to 8 per cent. This became necessary to cushion the anticipated effect of huge government spending such as the completion of capital projects approved by the federal government at the beginning of the year. In its efforts at ensuring an effective and efficient electronic payment system in Nigeria, the apex bank embarked on a public enlightenment campaign across the six geo-political zones. The campaign, which focused on the implementation of an end-to-end electronic payment of all forms of government suppliers, taxes, salaries and pensions in the country, became necessary owing to the lack of enthusiasm displayed by ministries, departments and agencies (MDAs) towards the directive issued by the Federal Government that all payments by the MDAs should be done electronically. It may be recalled that in January, 2009, the CBN introduced the e-manual as a short-term measure in ensuring immediate compliance, pending when appropriate structures for an end-to-end process is emplaced. Eco Bank Transnational Incorporated and Oceanic Bank Plc completed the first phase of their recapitalization process, with the acquisition of a 100 percent interest in Oceanic by ETI. The process was further consolidated by the official signing ceremony between both banks. Following the takeover, a new board was appointed with the new Group Chief Executive of ETI, Mr. Amod Expe as the Chairman of Oceanic, while Mr. John Aboh retained his position as the Managing Director/CEO of Oceanic Bank till further notice. The development came on the heels of similar take-over of Intercontinental Bank by Access Bank Similarly, Guaranty Trust Bank Plc (GTBank), appointed a new deputy Managing Director and three Executive Directors to its board. The new appointees are: Mrs. Cathy Echeozo, as Deputy Managing Director; Mr. Wale Oyedeji, Mr. Demola Odeyemi, and Mrs. Tola Omotola, as Executive Directors. The new executives replaced three former Directors namely Mr. Jide Ogundare, Mrs. Titi Osuntoki and Mr. Akin George, who voluntarily resigned from the bank.

33

Capital Market

In its drive to boost investor’s confidence in the capital market, the Nigerian Stock Exchange (NSE) pegged the minimum capital requirement for market makers at N500million, with an additional capital, based on the risk profile of the market maker. The NSE is to appoint two categories of market makers- the primary and supplemental market makers. While the primary market maker is to provide a two-way quote for 90 percent of the time spent trading daily, the supplemental market maker is to provide 60 per cent of the time in a trading day. As part of NSE’s criteria for membership firms to act as market makers, they are required to apply in writing, and must be a licensed broker-dealer registered with the Securities and Exchange Commission (SEC) and the Central Securities Clearing Systems (CSCS), and must have met the minimum capital requirement.

Stock Market at a Glance

Top Gainers and Losers as at December 30, 2011

Company Opening Price (N)

Closing Price (N)

Change (%)

Gainers Flourmills 62.34 65.45 3.11 UACN 29.70 31.18 1.48 OANDO 21.00 22.00 1.00 UNILEVER 28.50 29.00 0.50 PRESCO 8.26 8.67 0.41 BERGER 8.07 8.47 0.40 CADBURY 11.00 11.40 0.40 IBTC 8.00 8.30 0.30 GUARANTY 14.00 14.25 0.25 NAHCO 4.90 5.14 0.24 VITAFOAM 4.84 5.06 0.22 NASCON 3.82 4.01 0.19 SKYEBANK 3.67 3.84 0.17 ASHAKACEM 11.16 11.30 0.14 Losers Nigerian Breweries 99.37 94.42 4.95 WAPCO 45.00 43.25 1.75

34

Losers CHEVRON 60.67 59.00 1.67 GLAXOSMITH 23.90 23.00 0.90 ZENITHBANK 12.40 12.18 0.22 DANSUGAR 4.80 4.70 0.10 IKEJA HOTEL 1.78 1.70 0.08 CONTINSURE 0.88 0.84 0.04 STERLINBANK 1.05 1.01 0.04 DIAMONDBANK 1.94 1.92 0.02 FIDELITYBANK 1.48 1.46 0.02 FO 11.62 11.60 0.02 UNITY BANK 0.56 0.55 0.01 Source: Business, December 30, 2011.

Energy The Nigerian Electricity Regulatory Commission (NERC) issued a directive to the distribution companies licensed by the PHCN to stop collecting meter maintenance fees from consumers with effect from October, 2011. The directive was passed in a resolution, declaring meter maintenance fee illegal. In furtherance to this directive, a committee was set up to conduct a public inquiry into metre procurement and billing in the Nigerian Electricity Supply Industry (NESI), with a view to ensuring accountability for funds released for metering. It may be recalled that the Meter Maintenance Bill has remained a controversial bill among consumers who questioned the rationale for its inclusion as charges within the industry. In its efforts to boost electricity supply to teeming Nigerians, the NERC also issued operational guidelines to the new 20 independent power generation companies. The Independent Power Producers (IPP) are expected to add a total of 6,105 megawatts (mw) of electricity to the national grid within the next 36 months, effective from the first quarter of 2012. In pursuit of this, the Federal Government announced a N20 billion take-off fund for the Nigerian Bulk Trading Company Plc to facilitate the swift purchase of electricity generated by licensed IPPs across the country. It may be recalled that the Federal Government launched a roadmap for power sector and also set timelines to attain power supply targets. Meanwhile, the federal government signed an agreement with the American government that will allow the Independent Power Plants (IPPs) access to about $1.5 billion concessionary loans for the acquisition of equipment and services

35

from the United States. Towards this end, a Memorandum of Understanding was signed between the Minister of Power, Professor Bart Nnaji and the President of the US Export Import Bank (EX-IM Bank), Mr. Fred Hochberg.

Agriculture

To fast track access to finance in the rural parts of the country, the Bank of Agriculture (BOA) injected N1billion for on-lending to micro finance banks in remote areas. This gesture was presented in a communiqué issued at the end of the Financial Linkage forum organized by the International Fund for Agricultural Development (IFAD) and RUFIN. To actualize this, a committee was set up to ensure that farmers have adequate access to the funds, while attaining a sustainable rural financial system in 12 states of the federation, in which 36 local government areas were selected.

Macroeconomic Indicators, Fourth Quarter, 2011

S/N

Indicators

1 MPR (%) 12

2 CRR (%) 8



5 GDP (%) 7.68





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