The naira strengthened against the dollar last week as crude prices and the foreign exchange reserves pushed northwards. The naira rose 0.1 per cent to N157.85 a dollar, putting behind three days of declines of the local currency and increasing confidence that the Central Bank of Nigeria (CBN) can manage its stability.
The naira has risen 2.8 per cent this year, the best performer in Africa, according to data compiled by Bloomberg. Nigerian benchmark Bonny Light crude, which has risen 29 per cent from a June low this year, climbed for fifth day rising 0.1 per cent to $116.37 per barrel. The country’s foreign reserves rose to a more than two year high of $40.2 billion on September 11, according to data from CBN’s website.
The foreign reserves rose to $41.167 billion on September 10, stood at $36.35 billion on August 7; rose to $36.41 in August 8; $36.46 in August 9 and $36.51 in August 10. It had dropped to $36.36 billion in July 20, from $37.19 billion four weeks earlier, losing about $830 million within the period.
However, the reserves opened the month at $39.2 billion in September 3 and had kept a steady but consistent rise for one week before hitting the current benchmark. The foreign currency reserves rose to $68 billion in August 2008 before the global financial crises impacted negatively on it.
Analysts at Afrinvest said the CBN needs to build up adequate external reserves to satisfy the genuine needs for foreign exchange as such is consistent with the increase in the growth in economic activity. It will equally assist in conserving resources and withstanding external shocks.
The apex bank has also said there was urgent need to pursue policies that would foster macro-economic stability, economic diversification as well as encouraging foreign capital inflows.
It said a higher rate of retention of oil revenues should facilitate the efforts at maintaining exchange rate stability as an antidote to imported inflation without excessive reliance on monetary tightening measures.
Analysts predicted that Nigeria’s foreign reserves are expected to hit $60 billion by year end as oil production soars. Nigeria’s crude oil production spiked to an all-time high of 2.7 million barrel per day (mbpd) on the 25th of July, the first time in 50 years. This peak represented an increase of 28.57 per cent from the year-to-date average of 2.11 mbpd.
Market interbank Nigeria’s interbank lending rates climbed to an average of 16.33 per cent on Friday, compared with 13.5 per cent last week, on the back of cash withdrawals by the state oil firm and foreign exchange purchases.
The secured Open Buy Back (OBB) rose to 15.75 per cent, compared with 12 per cent last week, 3.75 percentage points above the central bank’s 12 per cent benchmark rate, and 5.75 per centage points above the Standing Deposit Facility (SDF) rate. Overnight placement closed at 16.50 per cent, from 14 per cent last week, while call money rose to 16.75 per cent, compared with 14.50 per cent two weeks ago.
Banks’ capitalisation
Although Nigerian banks often view their capitalisation as either strong or adequate, Standard & Poor’s (S&P) Ratings Services, a global rating agency, classified their capitalisation as “moderate” or “adequate,” under its criteria.
S&P said in a report to Reuters that Nigerian banks view their capitalisation stronger than it does because of large amounts of what the lenders classify as surplus capital, above the capital adequacy ratio (CAR).
“The average CAR for the eight largest Nigerian banks by asset size, according to publicly available financial statements, was 21.1 per cent, versus the 15 per cent regulatory minimum for banks with international operations. However, we calculate that capitalisation was a much lower 6.2 per cent, on December 31, 2011, according to our globally comparable risk-adjusted capital framework,” said Standard & Poor’s credit analyst George Maisey.
Banknotes, coins Although e-payment is becoming more popular in Africa, banknotes and coins will always be relevant and useful, Central Bank of Nigeria (CBN) Deputy Governor, Tunde Lemo has said.
Speaking at the Association of African Banknotes and Security Documents Printers (AABSDP) conference in Lagos, he said the cash-less policy of the apex bank is on course.
Lemo said banknotes and coins will always be useful in consummating transactions.
He said that the proposed N5, 000 note will reduce cost of banking operations, adding that Africa must embrace change and new technologies in printing of bank notes and minting of coins to keep counterfeiters on check.
Deloitte, MAN Akintola Williams Deloitte (AWD) and the Manufacturers Association of Nigeria (MAN) have concluded a one day seminar that is geared towards assisting Small and Medium Enterprises to achieve the International Financial Reporting Standard (IFRS) implementation. The IFRS is due to take effect from January 1, 2013.
IFRS Leader for Deloitte West and Central Africa, Oduware Uwadiae said there are benefits and challenges of IFRS reporting for SMEs, which include IFRS conversion process and the need for early preparation.
Bond yields Nigerian bond yields are expected to fall around 30 basis points this week as the market prepares for the country’s inclusion in the JP Morgan Government Bond Index – Emerging Markets (GBI-EM) from October. Yields on Nigeria’s 10 and 20-year bonds have shed 300 basis points over the past month on news of the index inclusion, which JP Morgan says could potentially bring up to $1 billion into one of Africa’s most developed debt markets.
Reueters report said the sharp fall in yields has also been driven by an improved inflation outlook, dealers said. Inflation unexpectedly eased in July to 12.8 per cent year-on-year from 12.9 per cent in June, surprising many analysts.
Auditors, compliance officers The banking watchdog said there was need to assess skills, qualifications, experience and competencies of staff currently occupying controlled functions in banks. Auditors, compliance officers and other bank staff involved in ensuring that due process is followed in banking operations fall within this group. These were conained in a CBN circular tagged: ‘Assessment of competencies in the Nigerian banking industry’ signed by Y.B Duniya for Director, Financial Policy and Regulation.
He said such exercise will enable Bankers’ Committee identify at the preliminary stages, gaps that would impede the effective implementation of the Competency Framework for the Nigeria banking industry being appraised by the apex bank. Duniya said that the list of controlled functions is not exhaustive as other important roles and responsibilities may be added.
N5, 000 banknote/ inflation There is no proven evidence of a correlation between inflation and higher currency denominations, FBN Capital and CEO, Economic Associates, Dr Ayo Teriba said. In a report tagged: ‘New banknote, no inflationary pressure’ FBN Capital said inflation is fuelled by too much money chasing fewer goods and not introduction of higher denomination of banknote.
The investment and research firm’s view was in response to criticisms against the Central Bank of Nigeria (CBN) currency restructuring programme, which will see N5,000 banknote introduced into the economy early 2013. The currency will become the highest value bill in circulation even as other changes will see the lower denomination bills of N5, N10 and N20 converted into coins. “This will increase the country’s currency structure to 12 from 11, divided equally between coins and notes. As expected, the announcement has generated a lot of controversy,” FBN Capital said in an emailed statement.
Bank to bank report First City Monument Bank Plc (FCMB) has reassured its various stakeholders and those of FinBank that the two lenders, which have been going through the process of integration will conclude the merger process next month.
Deputy Managing Director/Executive Director (DMD) of FCMB, Segun Odusanya gave this reassurance in a statement. He said the process is 95 per cent completed. “Our initial target was second quarter of the year, but we got delayed by issues around the Capital Market probe and the removal of the Securities and Exchange Commission Board. Things are now back to normal, and most of the approvals have been obtained,” he said.
Access Bank’s profit before tax (pre-tax) for the half year to June jumped 143.08 per cent to N30.07 billion as against N12.37 billion in 2011, the bank said in a statement obtained by Reuters.
Gross earnings rose to N108.75 billion in the same period, compared with N53.65 billion last year. Access Bank, which acquired rescued rival Intercontinental Bank, has proposed an interim dividend of N0.25 per share to its shareholders.
Fidelity Bank has been adjudged the “Best Telecoms Financing Bank” of the year . The bank won among three other lenders that were nominated for the award at the Eighth Annual Nigerian Telecom Awards held in Lagos.
The Chartered Institute of Bankers of (CIBN) has commended Unity Bank for collaborating with it in promoting professionalism in the industry. President and Chairman of Council of CIBN Segun Aina disclosed this when he led his members on a courtesy call to the bank in Abuja.
Aina, who said the institute regards the bank as part of the family, assured his council’s support at all times. He revealed that the institute is putting in place professional programmes aimed at enhancing quality in the industry.
