In continuation of its restrictive monetary policy stance, the Central Bank Nigeria (CBN) at the weekend withdrew a total of N150.1 billion from circulation, through sale of treasury bills. Subscription level at the auction was said to have dropped by 31 percent.
Bloomberg disclosed that the apex bank sold N42.97 billion of 91- day bills at a yield of 14.81 per cent, one basis point higher than the 14.80 per cent at an auction on February 23, while N50 billion of 182-day notes was sold with a yield two basis points lower at 15.48 percent. The liquidity management office, also sold N57.12 billion of 364-day securities at 15.57 percent, two basis points higher. Bids at the auction totalled N328.8 billion compared with N476.9 billion recorded previously.
Auctioning treasury bills through Open Market Operation (OMO) helps in reducing the volume of money supply in the system, because the liquidity management office accepts money in return for purchase of securities, and keeps the money out of circulation.
Experts at FSDH Securities Limited, in a report to THISDAY, argued that the effects of the CBN’s contractionary measures were: increase in yields on fixed income securities and interbank rates, drop in the prices of bonds across tenor, increase in finance cost for corporate and potential loss on bond portfolios of banks. The financial advisory firm also pointed out that despite the aggressive contractionary policy measures of the CBN, inflation rate had remained in double digit.
FSDH research had therefore recommended “adoption of some unconventional methods in dealing with the attack on the naira and the use of OMO to reduce the temporary excess liquidity in the market.”
On his part, an Economist at CSL Stockbrokers Limited, Alan Cameron, forecast that: “The drop in subscription level is likely the result of tighter liquidity conditions.”
The naira was relatively stable against the dollar at both the interbank segment of the forex market and the official market last week, due to the liquidity position of the forex market.
Specifically, the interbank witnessed inflow of forex from the Nigerian National Petroleum Corporation (NNPC) and some multinational oil companies last week. The local currency closed at N157.50 to a dollar at the interbank last Thursday. At the regulated Wholesale Dutch Auction System (WDAS), otherwise known as the official market, the CBN offered a total of $300 million last week at N156.01 to a dollar.
MFBs, Mortgage Banks
The CBN last week clarified that the new cash withdrawal/deposit limit is not applicable to Microfinance Banks (MFBs) and Primary Mortgage Institutions (PMIs). It had explained that both deposit-taking institutions are excluded, because they are expected to honour the withdrawal request of their customers and also meet other obligations. Specifically, the apex bank had explained that operators in both sub-sectors structured under the specialised banking model, were excluded from the policy of N1 million a day set for corporate bodies. However, the CBN had insisted that cash withdrawal/deposit limits are applicable to customers of operators of MFBs and PMIs.
The CBN had said it had to make the clarification because it came to its notice that some commercial banks were enforcing the cash withdrawal/deposit limit for corporate organisations on PMIs and MFBs.
It had explained: “PMIs and MFBs are specialised banks as defined under the new banking model which have customers that maintain savings demand and time deposit account with them. As deposit-taking institutions, they are obliged to honour the withdrawal request of their customers and other mature obligations.”
Africa’s Food Security
The World Bank’s Vice-President (Africa), Mrs. Oby Ezekwesili, last week said the global bank had queued behind Africa’s quest for food security and freedom from hunger, saying: “We now committing $1 billion to African agriculture investment.”
Ezekwesili had said that improving food security in Africa was well beyond managing fluctuating cost of food imports.
“We at the World Bank on an annual basis since 2009 have committed a billion dollars to African agriculture investment. This has been in line with the overall framework of the Africa Union Agricultural Development Programme,” she had said.
According to her, following the 2008 World Development Report on Agriculture for Development-with its cardinal focus on agriculture as a catalyst for development and economic growth, World Bank had doubled assistance of African agriculture to approximately $1 billion of new commitments annually. She had noted that any sustainable strategy for addressing issue of food security, working stridently to design interventions to improve targets and to contain budget costs, would be crucial as a committed focus to intra-regional trade.
The federal government last week said foreign companies benefiting from lucrative public sector contracts and the nation’s massive market would have to start setting up factories to manufacture some equipment in Nigeria.
Describing the initiative as industrial partnership, Minister of Trade and Investment, Dr. Olusegun Aganga, had said that government was currently implementing the initiative with various foreign companies.
“We have a programme we are working on, similar to what South Africa did… it is not the black empowerment, it is more about industrial partnership, where you have a company that is benefiting heavily from the system and you get them to invest in the local economy,” Aganga had said.
He had explained that an example of such partnership, which is already being implemented, was with General Electric (GE) from which Nigeria had procured locomotives and turbines.
He had added: “We bought our locomotives and turbines from GE, so the agreement we have with them is that they will come to Nigeria and start assembling locomotives and when they finish, we buy it from them; they come here and start assembling turbines and when they finish, we buy it from them. They call it company-to-country agreement but I call it industrial partnership.”
Foreign and Local Investment
Aganga had also disclosed last week that as part of efforts to boost the flow of foreign and local investment into the nation’s economy, the Corporate Affairs Commission (CAC) had received a marching order from the federal government to deliver on the goal of completing the process of registering new companies in the country within 48 hours by the end of this month.
Noting the impediment which the difficulty of company registration poses to the process of investment enhancement, Aganga had explained that the ultimate target for registration of new companies was actually 24 hours but on or before March 31, the Registrar General of CAC had been given an interim target of two days.
“We have embarked on a major investment climate reforms in the country. We want to improve the investment climate in the country and one step we have taken is to ensure convenience in the process of registration of companies. By the end of March, we target 48 hours for registration of new companies,” Aganga had also said.
Bank of Industry
Aganga had also revealed the approval of the restructuring of the Bank of Industry (BoI) by the president in order to sharpen the industrial sector’s specialised financial institution. This, he said, was to meet contemporary challenges of financing the non-oil sector of the economy in order to achieve the country’s objective of a diversified economy.
He had added: “The Bureau of Public Enterprises (BPE) is working on the restructuring of the Bank of Industry to make it bigger, so that it will have more funds to invest and be able to meet its mandates and objective. So we are looking at different alternatives. It is currently owned entirely by government.”
According to him, his ministry was embarking on a serious drive to rid the country of fake and substandard products.
THISDAY reported last week that Zenith Bank Plc had been adjudged ‘Best Bank in Nigeria’ for corporate governance practices, joining an elite group of 53 other winners selected from across the world. The award was in recognition of Zenith Bank’s ability to set an industry-wide example of best practices in Corporate Governance and lead by example. The ‘Corporate Governance Award’ organised by the highly influential World Finance magazine evaluates companies on a wide range of criteria including quality of policies and procedures adopted, quality of disclosures, elements of innovation in corporate governance practices and excellence in stakeholder relationship management.
Group Managing Director/Chief Executive, Zenith Bank Plc, Mr. Godwin Emefiele, had received the award certificate and plaque at a colourful ceremony. Emefiele had said he was humbled by the awards, which was a testimony of the bank’s commitment to observing the best practices in corporate governance.
World Economic Forum
The Nigerian Stock Exchange (NSE) last week said the forthcoming World Economic Forum (WEF) on Africa would provide opportunities for organisations in the country to look for financing.
Chief Executive Officer, NSE, Mr. Oscar Onyema, said the forum would help to enhance the growth of the capital market.
He had explained: “We know that financing is the number one problem in Africa, especially for small and medium scale enterprises (SMEs), so as an Exchange, we want to position ourselves to be able to provide an avenue for companies of all sizes, to have access to very reasonable priced financing at the forum.
“Nigeria has the population, the middle class and we actually command a very strong marketing bloc. We also have the expertise in terms of the banking industry and we are looking at how we can use that to our advantage at the WEF in May. The outcome will be a strong Nigerian agenda at the forum.”
Head of Middle East and Africa Memberships, WEF, Mr. Grant McKibbin, said the event provided the international body, the opportunity to meet its members and other business leaders in Africa, with a view to looking at issues that would be addressed at the world WEF for Africa.
The House of Representatives held a rowdy session last Wednesday following the adoption of a motion summoning the CBN Governor, Mallam Sanusi Lamido Sanusi, on the alleged misuse of public funds through funding of projects and donations to causes outside the purview of the apex bank.
Some members of the Kano Caucus had staged a walkout in protest while Hon. Bashir Babale (PDP/Kano) attacked Hon. Bukar Lawal Goni (PDP/Yobe) for supporting the motion. The rowdiness that ensued almost degenerated to a free-for-all as Babale also charged at almost anyone in sight but was later restrained by some of his colleagues.
The Minister of Finance, Mrs. Ngozi Okonjo-Iweala, last week told the Senate Joint Committee on Pensions Administration that the federal government saved N74 billion from the verification exercise and biometrics at the Police Pensions Office last year.
According to the minister, the verification exercise, carried out by the Pensions Reform Task Team (PRTT), discovered that the Police Pensions Office was receiving an excess of N1.5 billion monthly. Explaining how she got involved in the police pensions scheme in 2011, Okonjo-Iweala said she had to freeze the accounts after she got reports that some sharp practices were going on in the Office by the PRTT Chairman, Abdulrasheed Maina.
She had added: “As Finance Minister, my first instinct was to seek the permission of Mr. President to freeze the accounts, and that is exactly what I did. We had to make sure that every activity regarding the accounts had to be stopped.”
Source: All Africa.Com – 12 March 2012