The Nation Newspaper

Category: Money

  • Experts predict improved consumer price index

    Experts predict improved consumer price index

    The Consumer Price Index(CPI) will improve this year if the government reviews its macroeconomic policies, experts have said.

    According to the experts, the CPI fluctuated last year because of the government‘s misplaced priorities.

    CPI measures average changes in the prices of goods and services consumed by people daily. It is a major determinant of the rate of inflation. Usually, when the CPI is high, it has a corresponding effect on the rate of inflation.

    The experts said the CPI of 11.3 per cent and 11.7 per cent in August and September last year, as provided by the National Bureau of Statistics (NBS), can be improved once the government provides a stable and favourable interest rate regime, and enhance productivity.

    Former Institute of Chartered Accountants of Nigeria (ICAN) President Mr Emmanuel Ijewere said the economy was not productive last year because of huge interest rates occasioned by the fixing of Monetary Policy Rate (MPR) at 12 per cent. This, he said, affected productivity, resulting in constant variations in the prices of goods and services.

    He said: “The huge interest rates have crowded out the private sector operators, resulting in low productivity. Once this happens, it would be difficult to moderate the prices of goods and services in the country. The banks can no longer advance credit to the critical sector of the economy. They are moving and concentrating on fixed-income instruments such as Treasury Bills.“

    Ijewere advised the government to improve agriculture and food price index in particular. Noting that the food price index is a subset of consumer price index, he explained that the two can go together.

    “Agriculture is now being put forward as the major driver of employment in the country. The government must not relax if it wants to achieve food sufficiency, stabilises the prices of foodstuffs, and foster economy growth.

    Former Director of Budget and Research, Central Bank of Nigeria (CBN) Mr Titus Okunronmu, said CPI would improve when the government provides friendly and growth enhanced policies.

    He said the government has focused more in checking inflationary rates to the detriment of productive sectors such as manufacturing and agriculture.

    Mr Okunronmu said there should be a price control mechanisms in Nigeria, arguing that this would check the surge in the price of commodities. He said the government can provide stable inflationary rates, consumer price index, among other economy barometers, once there are no infrastructural challenges.

  • Why MfBs’ can’t recapitalise

    • Expert blames govt, DFIs

    Why did many microfinance banks (MfBs) fail to meet the December 31, last year deadline, for their recapitalisation? It is because the Federal Government and Development Finance Institutions (DFIs) did not come to their aid, says Managing Director, Support Microfinance Bank Sunny Akahmiorkhor.

    The MfBs were required to recapitalise with N20 million; N100 million and N2 billion, according to their category.

    Akahmiorkhor regretted that the MfBs framework, which requires state and local governments to contribute one per cent and five per cent of their annual budget to MfBs operations was not being implemented.

    He said the government’s non-commitment to MfBs’operations made it difficult for leading DFIs, such as the International Finance Corporation, International Development Bank (IDF) and Department for International Development (DFID), to assist MfBs.

    The Central Bank of Nigeria (CBN) has accused MfBs of being deficient in their understanding of micro financing. It said poor corporate governance and a high level of non-performing loans, among others, are also key challenges facing the subsector. According to CBN’s operational guidelines for the establishment of microfinance banks, they are not expected to engage in excessive spending.

    Last month, it warned that the deadline for recapitalisation would not be extended. In a circular, Director, Other Financial Institutions of CBN, O.A. Fabanwo, said it was exigent to remind directors and shareholders of the deadline.

    Fabanwo advised the MfBs to conduct due diligence and seek professional legal and financial advice.

    Many of the MfBs liquidated by the Nigeria Deposit Insurance Corporation (NDIC) ran into trouble when their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of the MfBs were taking excessive risks, and branching out too quickly without considering resources at their disposal and whether loaned funds were for short or long term obligations.

    A unit MfB bank is authorised to operate in one location without branches/cash centres and is required to have a minimum paid up capital of N20 million; its state counterpart is expected to have a minimum paid up capital of N100 million. It is allowed to open branches within the same state or the Federal Capital Territory (FCT).

    But the national MfB is authorised to operate in more than one state, including the FCT. It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states of the federation and the FCT, though subject to the approval of the CBN.

  • Mobile money agents seek clear pricing for services

    Consumers, merchants and other agents of mobile money are demanding a clear pricing structure for the effective implementation.

    According to a survey conducted by Visa Incorporated, respondents said individuals are price sensitive and also evaluate alternative options carefully. The survey analysed the financial services needs and expectations of mobile money among about 2,500 consumers, mobile money agents, and merchants in Bangladesh, Ghana, India, Indonesia, Nigeria and Pakistan.

    Ninety per cent of consumers expressed interest in making use of these services in the future, but cited costs of calls as the primary reason for choosing a mobile network operator.

    Also, lack of prevalent accessibility to mobile money agents was ranked as a key barrier to the adoption of mobile money. It said to drive adoption, cash and customer service will need to be accessible to meet expectations even as 54 per cent of consumers cited quick and easy access to cash as a key benefit of mobile money.

    The study also found that security concerns associated with carrying cash and the need to quickly send money to family members living far away are among the key drivers of mobile money adoption.

    The Visa study suggested that the success of mobile financial services is determined by how deeply a mobile money provider understands its customers and tailors the service to the needs of consumers and mobile money agents – from service menus, to marketing and education.

    It also found there is high awareness of mobile money services and capabilities among consumers in developing economies. “Eighty- one per cent of consumers surveyed intend to use mobile money to send money to family members, 56 per cent to pay utility bills and 52 per cent to save money for their family.The primary driver to adopt mobile financial services is the need to protect funds from theft and the ability to more easily send funds and pay bills,” it said.

    “Not having prevalent accessibility to mobile money agents is ranked as a key barrier to the adoption of mobile money. In order to drive adoption, cash and customer service will need to be readily accessible to meet expectations. Fifty- four per cent of consumers cited quick and easy access to cash as a key benefit of mobile money,” it said.

    The study included in-depth qualitative and quantitative research on money management needs, habits and practices as well as factors that need to be addressed for the adoption of mobile money services.

  • IFRS: Non-compliant firms’ accounts may be rejected

    The financial reports of quoted manufacturing companies whose accounts for the year ending December 31, 2012 do not contain basic provisions of the International Financial Reporting Standard rick being rejected, the Financial Reporting Council (FRC) has said.

    FRCis charged with enjoying accounting rules, and ensuring that other regulating bodies comply with their own regulations.

    Speaking to The Nation in Lagos, FRC’s technical resource person Uwadiae Oduware said impairment test on assets, consolidation of entities bought, consolidation of investments where investor has less than 50 per cent control, loans obtained at below market rate, among other, are expected to be included in the financial statements.

    Accounting reports that do not contain these stand the risk of being rejected, he added.

    Oduware said firms are deemed not to have complied with IFRS when their financial reports lack these basic elements.

    He said: “The deadline for the adoption of IFRS for manufacturing companies was December 31, 2012. Though there is no punishment for erring firms, FRC may reject financial statements that do not reflect basic provision of IFRS to serve as deterrent to others. Impairment test is not optional for any entity reporting on the basis of IFRS.”

    He said firms are not only required to carry out impairment test or review of their assets at the end of every financial year, but they must include it in their financial reports.

    He said Impairment of Assets known as IAS 36 is well spelt out in IFRS guidelines, stressing that firms that failed to carry out the test have violated IFRS rules.

    Mr Oduware said: “When a company buys assets, it must estimate the usefulness of such assets vis-à-vis its lifespan. For instance, if the assets are expected to last five years, and could not last that period due to certain problems or changes, the assets must be reviewed to know the extent of impairment or depreciation.

    “If a firm has a property close to the lagoon, and concluded that the property will last for 25 years. But due to flood, among other natural disasters, the economic life of the property has reduced. Based on this, the owner of the property is expected to carry out an impairment test on the asset to know the level of depreciation. This must be reflected in the financial statement of the company, as part of requirements for complying with IFRS.”

    He said many entities are looking for ways of avoiding this requirement because of its cost implications, stressing that the development will have grave consequence on the company.

    Oduware also said firms that failed to consolidate their entities before preparing their financial reports have breached IFRS rules.

    He added that firms are required to consolidate investments where investor has less than 50 per cent control to ensure transparency, adding that financial institutions are guilty of this misconduct. He said such actions would not be tolerated under IFRS implementation.

    Former President, Manufacturing Association of Nigeria (MAN), Alhaji Bashir Borodo said IFRS is still the most realistic antidote to problems relating to compilation and production of financial reports.

    He said the IFRS option is a more viable and error-free system, when compared with what obtained in the past. He said manufacturing companies have no choice than to comply with IFRS.

    “Ultimately, this is the way to go in Nigeria, not minding the fact the country is lacking technical expertise to execute the IFRS. The reason is because the idea will check financial malpractices,” he added.

  • Nigerian, Zambian banks target $1b power projects

    A Nigerian investment bank will partner Zambia’s largest distributor of power in the financing and development of six new hydroelectric power stations worth over $1 billion in Zambia, an industry official has told Reuters.

    Managing Director, Corporate Development at Zambia’s Cop-perbelt Energy Corporation (CEC) Michael Tarney said the six projects have capacity of over 800 megawatts (MW).

    Tarney spoke after the signing of an agreement for the joint development of power projects by CEC and the Nigerian company.

    “We are immediately looking at the $150 million Kabompo gorge hydro power project in north-western Zambia and the five Luapula river projects estimated to cost $1 billion.

    “The Kabompo project was moving well with financial close expected to be reached this year. The Luapula projects have a combined capacity of 800 MW and this year we are doing feasibility studies but I think we should be starting construction maybe 2013 to 2014,” he said.

    Analysts said the relationship with Africa Finance Corporation (AFC) should boost CEC’s chances of winning the bid for units of a Nigerian state power company lined up for privatisation, Tarney said.

    Nigeria plans a multi-billion dollar privatisation of its power sector to improve efficiency and had split the distribution network of Power Holding Company of Nigeria (PHCN) into 11 different units worth about $100 million each. “The relationship with AFC whose shareholders include the Nigerian government means we have a local partner,” he said.

    AFC Chief Executive Officer Andrew Alli said he was happy to find CEC as a potential partner. According to him, the power privatisation in the country offered an opportunity for huge investment by CEC and AFCoutside Zambia.

  • Naira weakens despite Diaspora dollar inflow

    The naira on Friday, slipped 0.3 per cent to N156.7 per dollar on the interbank market, and for the week, depreciated 0.4 per cent despite. This ensued despite dollar inflows from the Diaspora.

    The currency’s position was also aggravated by the Central Bank of Nigeria’s (CBN’s) suspension of foreign-exchange auctions, which curbed demand for the dollar.

    The apex bank, which sells dollars to keep the naira within a three per cent band around N155 per dollar, ended twice- weekly auctions on December 19 and resumes today. “The closure of foreign-currency auctions for the second week has reduced dollar supply, relative to demand from companies reopening for business,” Sewa Wusu, currency analyst at Lagos-based Sterling Capital Ltd., said told Bloomberg.

    The previous week, the naira had strengthened, reaching the highest in more than two months, as citizens living abroad returned for the holiday period, increasing the supply of dollars.

    “Many Nigerians in the Diaspora have come home with dollars, which has increased the supply,” Pabina Yinkere, head of research at Vetiva Capital Management told Bloomberg. Remittances to sub-Saharan African countries from citizens abroad are forecast to increase 6.3 per cent to $24 billion, the World Bank said in June. Nigeria, Kenya, Sudan, Senegal and South Africa are the largest recipients of remittances in sub- Saharan Africa, with about 69 per cent of the funds in 2010 from migrants in the United States and Western Europe, according to the bank.

    Central Bank policy makers left their benchmark interest rate unchanged at 12 per cent last year to control inflation and stabilise the naira. The inflation rate rose for the second consecutive month in November to 12.3 per cent from 11.7 per cent, the National Bureau of Statistics (NBS) said.

     

    T-Bills

    Yields are rising on Tanzania’s and Nigeria’s Treasury bills, although demand continues strong, according data posted on the website of the Central Bank of Tanzania and CBN. The average yield-to-maturity for Tanzania was 13.43 per cent on the 364-days bills, 12.86 per cent on the 182-days paper, 11.76 per cent on 91-days and 7.25 per cent on 35 days.

    For Nigeria, it is 12.5 per cent on the 364-days bills, 11.75 per cent on the 182-days paper, 11.6 per cent on 91-days. The main investors in government securities in both markets are Pension Funds and commercial banks who took more than 60 per cent of the market, followed by insurance funds and a few micro-finance institutions. Treasury bills are issued regularly as part of monetary control measures to help lenders manage their liquidity.

     

    Reserves target

    The Federal Government has missed the $50 billion target it set for the foreign reserves by December 31. The reserves closed the year at $44.2 billion based on figure obtained from the CBN website on December 24, $5.8 billion below the estimate.

    However, analysts have predicted that the Nigeria foreign reserve is expected to hit $47 billion by March next year. Managing Director, Financial Derivatives Company Limited, Bismark Rewane, said such accretion would strengthen naira’s stability.

    The reserves were $44.3 billion as at December 20, from a low of $33.09 billion January 4, this year. The global oil prices continue to fluctuate as risks of supply disruptions in the Middle East increase and global economic outlook weakens further. Bonny Light declined to as low as $111.4 per barrel in October and as at December 19 traded at $112.6 per barrel.

     

    Currency unification

    The central banks of West and Central Africa are considering merging their currencies to boost trade within the region, Lucas Abaga Nchama, governor of the Bank of Central African States, has said.

    According to Bloomberg reports, the West African and Central African CFA francs are separate currencies that are both pegged to the euro. Merging them would boost trade and help fight money laundering, Nchama said.

    The franc zone covers 14 African countries, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo Republic, Equatorial Guinea, Gabon, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.

    Six other West African nations, namely Nigeria, Ghana, Sierra Leone, Gambia, Guinea and Liberia — plan to enact a common currency, known as the Eco, by January 2015, 12 years behind an initial target, Temitope Oshikoya, chief executive officer, West African Monetary Institute, said.

     

    Finance Houses

    Reform package that would drive the finance houses sub-sector of the economy will be unfolded this month by the CBN. An insider at the Finance Houses Association of Nigeria (FHAN) who spoke in confidence, said the apex bank would also be releasing timeline for compliance to regulatory issues raised in the guideline.

    The source also hinted that the Board of Directors of the CBN is also expected to approve an enhanced capital base for the subsector to strengthen its operational capabilities.

    The Nation findings showed that the apex bank’s board would release a new prudential guidelines for the subsector that also includes raising the capital base from the current N20 million to about N1 billion. This, he said, would bring stability to the troubled sector. The source said other policy issues such as the appointment of Managing Directors form part of the ongoing reforms in the subsector.

     

    SWF

    Governors’ opposition against the Sovereign Wealth Fund (SWF) will affect the amount of money needed for investment but there is high chances of reaching a compromise, FBN Capital, a research firm has said.

    The Nigerian Sovereign Investment Authority is due to start its investment programme in March, but the agency will not have sizeable funds to invest until the state governors drop their opposition to the scheme. The legality of the SWF is still being challenged by different state governments across the country.

    It said higher budget threshold would reduce the transfers to the SWF, adding that given the porous nature of the account and the many obstacles to its expansion, there are legitimate concerns about the defences against an external shock and therefore called for sufficient buffers to be built.

    The $1 billion SWF was set up in May last year to invest savings made from the difference between budgeted oil prices and actual market prices. Nigeria on crude exports account for more than 90 per cent of foreign income and about 80 per cent of government revenue, making it vulnerable to swings in prices.

     

    Bank subsidiaries

    Nigerian banks with subsidiaries may rethink their continued operation in Ghana and Zambia as deadline for their recapitalisation in the counties ended last year. The Nation’s findings showed that not much has been achieved in terms of complying with the recapitalisation order by local banks in these countries.

    Specifically, Ghana and Zambia central banks had raised their minimum capital requirement for banks, saying that the measure would help mobilise additional resources for their economies and enable banks participate effectively in their national economic growth as well as provide more funds for flow of credit.

    In the case of Ghana, whose financial market had been undergoing some restructuring since the discovery of oil in the country, the Bank of Ghana has directed all banks to recapitalise to the tune of GH¢60 million ($31.7 million) by the end of 2012, from the $5.28 million it used to be.

     

    Exchange rate

    The exchange rate was relatively stable in the past one year, with the naira maintaining moderate appreciation and depreciation at intervals.

    The naira-dollar rates stability was largely as a result of increased supply of foreign exchange through autonomous sources to the interbank segment. Also, the CBN intervened in the market to dampen demand pressure and increased the net open position of commercial banks in part to curtail speculative foreign exchange demand. To achieve this, the regulator adjusted the mid-point exchange rate band from N150 plus or minus three per cent to N155 plus or minus three per cent within the year.

    Managing Director, Blue Wall Bureau De Change (BDC) said that despite occasional upsurges in foreign exchange demand due to interventions by the CBN and the increased supplies from autonomous sources, the exchange rate never exceeded a two per cent appreciation or depreciation margin. He said the year has seen some of the CBN policies on forex reflect on the dollar-naira parity at both the local and international market.

     

    CIBN

    The Chartered Institute of Bankers of Nigeria (CIBN) has reiterated the need for certified bankers in the country to work in other African countries. In a statement, the institute said a communique at the end of its Annual General Meeting (AGM) called for an inter-country recognition and acceptance of qualifications and certificates of member countries. This, it said, will encourage and promote mobility of labour as well as skills among banks in the continent.

    It stressed the need for the Alliance of African Institute of Bankers (AAIOB) member institutions to participate actively in the establishment, programmes and activities of the Global Banking Education Standards Board (GBESB), which is expected to be launched at the World Conference of Banking Institutes (WCBI) scheduled to hold in Nairobi, Kenya in June, this year.

     

    Bank to bank report

    Guaranty Trust Bank Plc has re-affirmed its commitment to the safety of stakeholder funds as it prepares for the financial year. In a statement, the bank said it has installed several new technologies and introduced a number of internal procedures that enable it check frauds on customers’ accounts.

    The bank’s Managing Director Segun Agbaje said the lender is committed to ensuring that its customers are protected from the rising incidence of online and other forms of electronic fraud being experienced within the industry.

    Ghana’s economic growth is set to beat the African average for a sixth year in 2013, risks boosting imports and fuelling further weakness in the region’s third-worst performing currency, Standard Bank Group Limited and Ecobank Transnational Incorporated (ETI) have said.

    The cedi, which has declined 14 per cent against the United States currency last year, may slump to 2.15 a dollar over the next 12 months, according to Ecobank’s head of economic research, Angus Downie. Samir Gadio, emerging-markets strategist at Standard Bank, sees the Ghanaian unit at 1.95 a dollar by the end of 2013. It weakened 0.3 per cent to 1.9065 a dollar according to data compiled by Bloomberg.

     

  • CBN lists recapitalisation options for mortgage banks

    The Central Bank of Nigeria (CBN) has outlined the options for recapitalisation available to Primary Mort-gage Banks (PMBs).

    CBN Director, Other Financial Institutions Department (OFISD), O.A. Fabamwo, said PMBs could raise funds from the capital market, right issue, private placement, public offer, business combination, mergers and acquisition to enable them meet the recapitalisation deadline of April 30, 2013.

    He said it was important to remind directors and shareholders of the options to meet the prescribed capital requirements of N5 billion for National PMBs and N2.5 billion for State PMBs and the documentation requirements to obtain regulatory approval for each option.

    He, advised the banks to conduct due diligence and seek professional legal and financial advice. However, the PMBs that may choose to undertake rights issue, private placement, or public offer, are advised to complete the process and submit the documentary requirements for verification on or before March 31, 2013.

    This, he said, is to allow enough time for the capital verification exercise and subsequent correction of any discrepancy and/or submission of any additional evidence that may be required, to ensure that the capital is verified, confirmed and approved before the stipulated deadline.

    Also, the PMBs that may choose the business combination option would have to comply with the requirements of the Banks and Other financial Institutions Act (BOFIA), Companies and Allied Matters Act (CAMA), 1990 and the Investment and Securities Act (ISA), 2007.

    They are also to obtain regulatory approvals of the Securities and Exchange Commission (SEC) and the CBN, hold statutorily required meetings and obtain orders of the courts, where necessary.

    “These timelines are for guidance only. PMBs are strongly advised to conclude the processes even before the recommended timelines,” he said.

  • MfBs record N5.8b loss

    • CBN urged to extend Dec. 31 recapitalisation deadline

    A microfinance banks recorded a loss of N5.8 billion last year, the Central Bank of Nigeria (CBN) has said.

    Speaking at a forum organised by the National Association of Microfinance Banks (NAMBs) in Lagos, a senior staff member of Other Financial Institutions Department, (OFID), CBN, Mr David Adelana, said despite the loss, the banks are determined to improve and engender economic growth.

    He said: “Based on the CBN’s report, the microfinance institutions have significantly reduced their losses from N11 billion in 2010 to N5.8 billion in 2011. This is, in spite of various odds in the sub-sector and the economy in particular.”

    He said the apex bank introduced the Know Your Customer (KYC) policy to mitigate risks in the industry, advising the banks to apply stricter measures to safeguard depositors’ funds.

    He said certain commercial banks contend with a lot of dormant accounts because their owners are not bothered.

    “First Bank and Union Bank are having many dormant accounts. “The reason is because people that opened these accounts do not come back to operate them. This is one of the reasons behind the introduction of KYC guidelines. It is now left for banks to put in place customer due diligence in place to control risks,” he added.

    MfBs have called on CBN to extend the recapitalisation deadline by one year. The operators said the December 31, deadline is not feasible because of the poor state of the sub-sector, urging the banking watchdog to extend the deadline for recapitalisation to December 2013.

    Reacting to the CBN’s circular entitled: “No deadline extension for Microfinance Banks and Primary Mortgage Institutions” dated December 20, 2012, the Chairman, NAMBs, Southwest Region, Mr Olufemi Babajide, said the banks had no choice but to seek an extension of the deadline. Babajide said though some banks have agreed to merge operations to get the capital base of N20 million, N100 million and N2 billion, they are still facing liquidity problems.

    He said operators were making efforts to get the required capital and further escape CBN’s hammer.

    “It is not that the banks are not taking the recapitalisation issue seriously. Since 2011, when the CBN imposed a multi-phase and flexible capital regime on operators, efforts are being made to ensure that operators recapitalised based on their capacities. However, liquidity squeeze has stalled the ambition of the operators to recapitalise and play at either local, state and national level as contained in the recapitalisation guidelines set for the banks,” he said.

    The association’s former National President, Mr Mathias Umeh, said recapitalisation is germane to the growth of the sub-sector. He said operators still have more time to shore up their capital base for growth. He said strategies on how to meet the capital base have been evolving among the operators since last year.

    He advised operators to double their efforts to recapitalise their operations, in case CBN extends the deadline.

    He said mergers and acquisition process continues in the sub-sector, stressing that the bigger banks are entering into agreements with the smaller ones to form bigger and stronger institutions.

  • CBN’s policy triggers investment in TBs, bonds

    Central Bank of Nigeria(CBN) tight liquidity measures in the past 12 months would result in in-flow of funds to the banking industry, experts have said.

    They argued that CBN’s decision to continue tightening liquidity via raising the Monetary Policy Rate (MPR) would help in changing investors’ decision, and in moving funds from one segment of the financial market to another.

    According to them, the banking sector would benefit greatly as investors abandon the capital market for less risks and high yielding instruments such as Treasury Bills (TBs).

    Speaking on the issue, the Managing Director, Investment Banking, BGL Securities, Mr Wale Oluwo, said the decision to maintain MPR at 12 per cent will further depress the capital market because investors would abandon stocks for a safer financial instruments.

    Oluwo said the development would make fund managers and banks to continue to invest in safe government instruments such as TBs and bonds where they can make cheap and double digit returns without taking any risks.

    He said though banks would be making money from the two fixed-income instruments, they would nevertheless be able to provide money to the private sector of the economy. He said the apex bank plans to leave MPR at 12 per cent would hike the lending rates, thereby hindering private sector operators to access credit for growth.

    Accordingly, funds will not get to the private sector and their financial performance would continue to dwindle, further depressing the prices of their shares on the exchange. Individuals and households will also not have access to funds which will make the Nigerian economy to continue shrinking,” he said.

    Also, the Chief Executive Officer, Lambert Trust and Investment, Mr David Adonri, said: “The implication of the retention of MPR at 12 percent for the capital market is that the fixed income market will continue to maintain its dominant position.”

    He added that prevailing high interest rate on bank borrowing and increasing public borrowing will continue to crowd out the real sector and the equities market.

    The Vice Chairman, Anchoria Investments and Securities Limited, Dr Olusola Dada, said the outlook in the fixed-income market remains positive in view of the regulatory stands on certain financial matters.

    Dada said the stock market thrives on liquidity coming mainly from the private sector, adding that inability of the sector to access credit for investment purpose would have far reaching effects on the capital market.

    He said once private sector operators are unable to access the lending window available to them, they capital market runs the risk of getting liquidity for growth. He said investors now preferred treasury bills and bonds option where they would on average get some earnings to share.

    “I think the money market rates are now more appealing to some investors since they are sure of getting returns on investments. To some people, it is safer to put their money in fixed accounts, or invest in TBs for better yields. If CBN continues with its liquidity tightening measures by way of retaining MPR or increasing it further, the better for banks among other investors in fixed income securities. Conversely, the situation portends danger for capital market operators,” he said.

  • Statistics Bureau projects rate cut

    As the global economy continues to slide, the scope for rate cut by the Central Bank of Nigeria (CBN) has widened and should be expected in 2013, the Nigeria Bureau of Statistics (NBS) has said.

    The agency said the rise in inflation from 11.7 per cent in October to 12.3 per cent year-on-year last month was informed by a flood-related temporary rise in food prices. However, with the worst of this now seemingly over, inflation should begin to ease again in the coming months, which will open up the possibility of monetary easing next year.

    The NBS said the continued weakness in world demand expected in 2013 will ease pressure on global commodity prices.

    It explained that given policymakers’ concerns over fresh spikes in global food prices, the CBN is likely to remain in wait and see mode for a while longer. The CBN kept rate at 12 per cent unchanged at the last Monetary Policy Committee meeting. “Our expectation is that as the global economy continues to slow, we think there is scope for rate cuts in 2013,” it said.

    The MPR, the benchmark rate by which the CBN determines interest rate, has remained at 12 per cent since October 2011 when it was increased from 9.25 representing 275 basis points raise. Beside, the CBN was advised to sustain its efforts at finding other innovative ways to unlock the credit market and stimulate the economy.

    NBS said that on a year-on-year basis, the relative increase in the headline index in November was as a result of higher prices in both the food and core indices. The core sub-index has deviated from its trend over the previous months, increasing to 13.1 per cent, while food prices continue to indicate lagged effects of the floods which occurred from July to mid-October, as well as other demand and supply conditions.