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The Nigerian Stock Exchange (NSE) chalked 50 on Sunday June 5, 2011.
Established on 5th June, 1961 through the Lagos Stock Exchange Act, the exchange has grown from one small equity market with only four listed companies, all foreign to one of the biggest stock markets in Africa with about 260 quoted companies.
All over the world, stock markets act as important catalysts for economic development and growth. Without having fully developed stock market, a country will not be able to increase the availability of equity funding and move towards more balanced financial structures.
Stock exchange markets enable publicly-traded companies to raise investment capital through the sale of shares to investors.
Liquidity, the ease with which assets can be converted to cash, is an important factor in the ability of a stock exchange to influence economic growth and development. Nations with liquid stock markets grew more rapidly than those with illiquid markets. Liquid stock markets enable investors to sell shares easily, thus raising capital for firms and facilitating more long-term investments.
For the five decades that it has existed, the Nigerian Stock Exchange has acted as facilitator between buyers and sellers, as they exchange stock that they hold in companies. Most of the listed companies have foreign/multinational affiliations and represent a cross-section in the economy, ranging from agriculture through banking, manufacturing to services.
In its fifty years of existence, the NSE has witnessed its highs and lows. The most challenging for the exchange, perhaps, is the market somersault of 2008 which resulted in the exchange shedding a record N4.7 trillion of its total market capitalization. In a matter of weeks, the exchange went from the best performing to the worst performing.
The eight rescued banks that failed the stress test jointly conducted by the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation are still technically insolvent, the Central Bank of Nigeria has said.
The CBN, which disclosed this in an advertorial Friday, added that the value of the banks’ negative assets stood at N1.28tn as at December 31, 2010.
The advertorial, signed by the CBN Governor, Lamido Sanusi, stated that the situation of the banks would continue to worsen as long as the holes in their balance sheets, which were “created by mismanagement and outright theft,” were not filled with capital.
The rescued banks are Intercontinental Bank Plc, Equitorial Trust Bank Limited, Spring Bank Plc, Union Bank of Nigeria Plc, Bank PHB Plc, Afribank Plc, Finbank Plc and Oceanic Bank International Plc.
The managing and executive directors of the banks were sacked after two rounds of stress test in 2009 and a N620bn lifeline was given to them.
Intercontinental Bank, according to the advertorial, had the highest negative assets value of N330.709bn as at December 31, 2010, while Afribank followed with N260.94bn.
Bank PHB’s negative assets stood at N242.309bn, Union Bank had N135.894bn, while Finbank recorded negative assets of N104.751bn as at December 31, 2010.
Nigeria’s total foreign debt has risen to $5.23bn, according to the Debt Management Office.
Statistics obtained from the DMO on Monday showed that the nation’s foreign debt increased from $4.58bn at the end of last year to $5.23bn as at March 31, 2011, representing a 14.16 per cent increase within a period of three months.
According to the DMO, the increment resulted from the $500m loan obtained from the International Capital Market by the Federal Government recently, as well as variations in exchange rates.
A segmentation of the nation’s debt profile showed that a greater proportion of it came from the World Bank Group, as this source contributed $3.79bn to the total external debt stock.
The African Development Bank Group, on the other hand, accounts for $398.75m, while commercial loans account for $188.61m.
The country also owes $161.33m in bilateral loans in addition to the $500m ICM loan.
The domestic debt component, on the other hand, has risen to N4.87tn from the N4.5tn, which DMO declared at the end of December 2010.
Much of the domestic debt was incurred through the Federal Government of Nigeria bonds, issued on monthly basis by the DMO and with maturity dates ranging from three to 20 years.
The FGN bonds accounts for N3.06tn or 62.78 per cent of the total debt profile.
The Nigerian Treasury Bills contributed N1.44tn or 29.57 per cent to the debt stock, while Treasury Bonds accounted for N372.9bn or 7.7 per cent.
The Director-General, DMO, Dr. Abraham Nwankwo, explained that the nation’s growing domestic debt was necessary to deepen the market and provide a vital source of funding for government’s budget deficits.
He said, “The DMO re-introduced the issuance of sovereign bonds in 2003 but started regular bond issuance in 2005, based on a programmed monthly issuance calendar. With external borrowing limited to the concession windows, borrowing from the domestic market became the main source of raising capital by the Federal Government for funding its activities.
“The policy shift towards the development of the domestic market was anchored on the desire to not only finance government budget deficits, but also provide the much needed platform for raising long-term capital for funding public and private sector projects. It is also to insulate the domestic economy from external contagion, develop the domestic capital market and provide a benchmark for pricing other financial instruments in the system in line with global best practices.”
Consequently, as at December 31, 2010, domestic debt accounted for 86.71 per cent of the nation’s total debt stock, which stood at about N5.19tn.
The DMO’s Annual Report and Statement of Accounts 2009 showed that the country spent $3.18bn on debt servicing in 2007. This increased to $4.05bn in 2008 and dropped to $2.34bn in 2009.
In terms of proportion, the domestic debt component accounted for 67.91 per cent, 88.54 per cent and 81.67 per cent of the debt servicing expenditure in 2007, 2008 and 2009 respectively.
External debt, on the other hand, accounted for 32.09 per cent, 11.46 per cent and 18.33 per cent of the total debt servicing expenses in 2007, 2008 and 2009 respectively.
Nwankwo said the concern of Nigerian citizens on the level of the nation’s debt had been taken into consideration by the Federal Government.
For this reason, he said, deficit financing had been reduced from 6.02 per cent in 2010 to 3.62 per cent in 2011 and would further reduce to 2.88 per cent and 2.62 per cent in 2012 and 2013 respectively.
He added that the nation’s domestic debt had not reached the level where the public sector could be said to have crowded the private sector from the debt market as the World Bank had alleged.
According to him, the DMO is developing a plan to help the private sector to access the bond market for long-term funding needs.
Standards Organisation of Nigeria (SON), the Federal Government agency which is saddled with the regulation of the quality of goods produced, imported and used in Nigeria, has said that about 80 percent of goods imported into the country for onward distribution and use are sub-standard.
The Director-General of SON, Dr. Joseph Odumodu, said this at the Commerce and Industry Correspondents Association of Nigeria (CICAN) excellence award ceremony, which was held in Lagos.
Dr. Odumodu said that when he took over the reins of authority at the agency a few months ago, he was confronted with scary details of the peddling of fake and sub-standard goods in the country.
“When I took over at SON I found scary details, we have a programme called SONCAP for regulating the quality of goods imported into the country, but I discovered that importers would register and get SONCAP approval with good quality products but turn around and import poor quality products different from the ones they presented for certification,” he lamented.
He however reiterated his determination and that of his staff at SON to turn the ugly trend around.
According to him, SON is currently working on a free sale agreement, which will ensure that other countries will only bring the products that they consume into Nigeria as well as take full responsibility for the failure of the goods, which they have imported to meet minimum required standard.
He said highly-placed Nigerians involved in these shady deals mount enormous amounts of pressure on them with the aim of intimidating agents of SON and preventing them from carrying out their constitutional responsibilities.
He however stressed that no amount of threats from these highly-placed fraudulent Nigerians will stop the agency from fulfilling its mandate.
Deeply worried by the state of privatized public companies, President Goodluck Jonathan on Friday directed the Bureau of Public Enterprises that henceforth all decisions on privatization should be based on competence, capability and capacity to deliver.
“No other considerations must be admitted, no politics, no influences,” Presidential Spokesman Ima Niboro, quoted Jonathan as saying.
According to Mr. Niboro, “Jonathan is disturbed that considerations other than competence and capacity were part of the final investment decisions taken in the sale of the companies.
“The President is going to be strict and is going to monitor it directly to ensure that only issues of competence, capacity and capability will guide investment decisions on privatization in this country from now.”
Mr. Niboro asserted: “Privatization is a laudable initiative and the President wants us to continue along that line. That is the way for the future and that is the way to grow the Nigerian economy.
“He is understandably disturbed by certain development because many privatized companies are not doing well. In fact many of them don’t seem to have fared better in private hands than they did in government hands. Apart from one or two, maybe the Eleme Petrochemicals, beyond those ones, they have not done very well.”
Age falsification, forging of acknowledgement card by applicants and other sharp and corrupt practices rocked the recently concluded recruitment exercise into the Nigeria Customs Service (NCS).
Besides the sharp practices by applicants, highly-placed Nigerians hijacked the entire process by ensuring that their own candidates were recruited to the revenue collecting agency.
Vanguard gathered that highly-placed Nigerians including serving officers also ensured that their candidates were also favoured in the recruitment exercise.
Customs source disclosed that over 800,000 applications were received for 2,000 vacancies, an indication of the high level of unemployment in the country.
Applicants, who spoke to Vanguard on the condition of anonymity, said that this was the worst test and interview they have ever attended.
Some of them said that they got to the exam center as early as 7 a.m and did not leave there until 3 p.m due to shabby manner the exams and interview were conducted.
The applicants disclosed that from the very beginning the entire exercise were fraught with corruption because the Customs website through which applicants were suppose to apply was opened for only two days.
Customs source further disclosed that most of the applicants failed to read the conditions and instructions before filling the forms on-line.
The source explained that there were different categories for different applicants, adding that for level 8 and 9 the requirement was a university degree with a good pass while level 7 required a Higher National Diploma (HND) as against Ordinary National Diploma (OND) and National Certificate of Education (NCE) required for levels 5 and 6
It also gathered that because of the surge, most of the applicants could not access the website and when they did, they did not follow the instructions as degree applicants applied for HND jobs and HND holders applied for jobs meant for degree holders.
Vanguard learnt that because of the desperation of most of the applicants, a lot of fake and forged certificates were presented and the Customs had a hard time sorting out these fake certificates and forged acknowledgement cards.
It will be recalled that the last but one recruitment exercise carried out about four years ago was also fraught with irregularities and corruption as married and pregnant woman were recruited into the Service.
The banking sector in Nigeria is forecasted to grow 15 percent year-on-year in 2011, as toxic assets of banks are being cleaned up by the Assets Management Company of Nigeria (AMCON).
Some top-rated banks in the country could grow as high as 25 percent, investment banking analysts, Rencap said yesterday in its Nigerian banking report released in Lagos.
RenCap’s optimism of the growth in credit follows recent positive trends from the banking sector, especially with the on-going clean-up process on banks’ toxic assets being undertaken by the Asset Management Corporation of Nigeria (AMCON).
Making reference to financial trends, RenCap noted that credit growth was recovering and should deliver 15 percent sector-wide growth in 2011 (expected), while margins should see upward pressure from a rising-rate environment.
“Cost focus at many banks is already paying dividends while provisioning charges are falling fast, in line with improving asset quality. On heavy capital bases, Return on Equities (RoEs) are trending to double-digit territory while Return on Assets (RoAs) of 2 percent-plus are the norm by 2012-2013 and are more indicative of profitability,” RenCap stated in the Nigerian banking sector report.
The analyst’s report incorporates coverage on Zenith Bank Plc, First Bank Plc, Access Bank Plc, Diamond Bank Plc, Guaranty Trust Bank (GTB) Plc, United Bank for Africa (UBA) Plc, Skye Bank Plc, First City Monument Bank (FCMB) Plc and Fidelity Bank Plc.
The report also incorporates strong buy recommendation for Zenith Bank, First Bank, UBA, FCMB, Skye Bank and Fidelity Bank as the sector looks to a new growth spurt.
Renaissance Capital, the emerging markets investment bank launched the 2011 Nigerian Banking report, re-initiating coverage on those nine Nigerian banks and presenting a positive macro economic outlook – 7-8 percent GDP growth in 2011 for the nation, following the recently concluded elections.
David Nangle, an analyst at RenCap said: “Following the relatively smooth and orderly election process in April and taking into account AMCON’s success at restoring confidence in the Nigerian banking sector, we believe it is poised for a new era of growth. This is based on Nigeria’s strong macro-economic outlook, with growth projected to be between 7-8 percent in 2011 and the strong capitalization in the banking sector, which is majority deposit-funded and ample liquidity provide an enticing structural backdrop for Nigerian banks.”
“In 2011, we think Nigeria is set for another year of 7-8 percent GDP growth (2010: 7.8 percent) and with the oil price running north of $100/bbl, the current account should run a surplus of 9 percent.
Inflation remains a concern at 12 percent 2011 (expected), while we expect the naira to remain broadly stable. The recent election cycle has, on balance, been positive and should shift market focus away from political risk,” Renaissance Capital noted.
THE Assistant Director, African Financial Institution, Uwaoma Ekeoma, has said that the African Development Bank has increased its project implementation in Nigeria from 21 per cent to 48 per cent.
Ekeoma made the announcement last week in Abuja at a workshop on “Improving Financial Management and Disbursement Implementation Capacity for Projects.”
The News Agency of Nigeria quoted her as saying that the workshop was aimed at improving the quality of project implementation by providing project teams with the necessary tools to ensure good financial management systems.
Ekeoma, who represented the Permanent Secretary, Federal Ministry of Finance, added that ADB had decided to focus on financial management and disbursement issues in Nigeria.
“We will continue to discharge our obligation as stipulated in the various agreements and protocols executed with the bank group in furtherance of project implementation in the country.
“The ministry will ensure timely release of government’s counterpart funding, insulation of project implementation units from political interference and effective project monitoring and supervision.”
Ekeoma added, “We will henceforth recommend to the bank the cancellation of any non-performing projects in its portfolio and that the outstanding balance of such projects would be expeditiously re-allocated to other performing ones.”
The ADB Country Representative, John Baffoe, said that many of the bank’s financed projects in Nigeria still had financial management and disbursement issues that slowed down their implementation.
He expressed the hope that at the end of the workshop, participants would understand and be able to apply financial management and disbursement rules and procedures of the bank in project implementation.
“I hope the participants will take this workshop seriously so that all the noted financial management and disbursement implementation issues are resolved,” he said.
NIGERIA’S gas production is expected to rise to 80 billion cubic metres (bcm) by the end of the 2015, with demand rising by 215 per cent between 2010 and 2020, while export potential increases to 39bcm, largely in the form of Liquid field Natural Gas (LNG).
This information was contained in the latest Nigeria Oil & Gas Report from Business Monitor International (BMI) for the second quarter of 2011.
BMI forecasts that the country will account for 8.82 per cent of African regional oil demand by 2015, while providing 23.07 per cent of supply.
Regional oil production has been estimated to reach 10.37mn bpd in 2011 and forecasted to rise to 11.92m bpd by 2015.
According to the report, oil exports were growing steadily because demand growth was lagging behind the pace of supply expansion.
“In 2001, the region was exporting an average of 4.87m bpd. This total rose to an estimated 6.10m bpd in 2010 and is forecast to reach 7.44m bpd by 2015. Angola has the greatest production growth potential, with Nigerian exports set to climb if the country can resolve recent quasi-political issues,” it added.
It disclosed that the African region consumed an estimated 123.7bcm of natural gas in 2010, with demand of 176.2bcm forecast for 2015.
“Production of an estimated 217.7bcm in 2010 should reach 321.2bcm in 2015, which implies net exports rising from an estimated 94bcm to 145bcm in 2015. Nigeria consumed an estimated 10.51 per cent of the region’s gas in 2010, with its market share forecast at 13.62 per cent by 2015. It would have contributed 15.62 per cent to estimated 2010 regional gas production and by 2015, will account for 18.37 per cent of supply.
The 2010 full-year outturn was $77.45 per barrel for OPEC crude, which delivered an average for North Sea Brent of $80.34 per barrel and for West Texas Intermediate (WTI) of $79.61 per barrel.
It stated that the BMI set its 2011 supply, demand and price forecasts in early January, targeting global oil demand growth of 1.53 per cent and supply growth of 1.91 per cent.
The BMI said that Nigeria’s Gross Domestic Product (GDP) rose by 7.8 per cent in 2010 and BMI forecasts average annual growth of 7.7 per cent in 2010-2015.
“We expect oil demand to rise from an estimated 288,000bpd in 2010 to 395,000bpd in 2015, representing 6-7 per cent average annual growth.
The international watchdog expects Nigeria gas production to reach 59bcm by 2015, up from an estimated 35bcm in 2010.
Consumption is expected to rise dramatically to around 24bcm by the end of the forecast period, allowing exports of no more than 35bcm. This threatens the country’s liquefied natural gas (LNG) export business unless fresh supplies can be located and developed.
“Between 2010 and 2020 we forecast an increase in Nigerian oil and gas liquids production of 50.9 per cent with volumes rising steadily to 3.50m bpd by the end of the 10-year forecast period. Oil consumption is set to increase by 96.6 per cent, with growth slowing to an assumed 7.5 per cent per annum towards the end of the period and the country using 567,000bpd by 2020.
“Nigeria now holds second place in BMI’s composite Business Environment Ratings (BERs) table, which combines upstream and downstream scores. The country now shares third place with Ghana in BMI’s updated upstream ratings.”
The report disclosed that Nigeria’s score benefits from its substantial oil and gas reserves, its oil and gas production growth outlook and high reserves-to-production ratios (RPR). The competitive landscape features numerous non-state companies and licensing terms are generally acceptable, although potentially under review.
However, negative country risk factors undermine the hydrocarbons-specific strength.
Nigeria is in the upper half of the league table in BMI’s downstream ratings.
The total number of active subscribers to telecommunications operators in the country has now surpassed the 90 million mark, the Nigerian Communications Commission has said.
Statistics obtained from the regulatory agency in Abuja yesterday put the number of active lines at the end of February at 90,583,306 out of the 122,589,647 connected lines.
A segmentation of the active lines showed that the Global System for Mobile Communications lines were 83,453,999 as at February; on the other hand, the mobile Code Division Multiple Access lines were 6,111,669, while the fixed and fixed wireless lines stood at 1,014,691.
Consequently, the total number of inactive lines as at the same date stood at 32,006,341. This represents a churning rate of 26.11 per cent.
This statistics show that the number of inactive lines in the country increased significantly between January and February. Our correspondent had reported that 24.79 million connected lines were inactive by the end of January.
The number of connected GSM lines by the end of January stood at 96,547,864, while the active lines were 82,618,510. This put the number of inactive lines at 13,929,354 or 16 per cent.
The number of connected mobile lines offered by the CDMA operators stood at 12,338,686, while the active lines were 6,186,442. This indicates that 49.8 per cent of the CDMA lines are inactive.
The fixed operators recorded the highest number of inactive lines. While a total of 2,741,983 were connected, only 1,035,391 were active. This shows an inactive rate of 62 per cent.
A number of reasons account for the high rate of inactivity in lines (or churning rate in communications parlance) provided by network operators in the country. One of the reasons is the poor services being rendered.
Many subscribers, who have been frustrated by the poor quality of services being rendered by the operators, find it more convenient to abandon their lines for other service providers rather than carry phones that do not work when they need services desperately.
Another reason for the high rate of dormant lines on the networks is the high rate of promotions targeted at attracting new subscribers.
Occasionally, these promotions produce many lines, which the subscribers do not really need.
Low entry cost and perceived high call rates or tariffs also account for the high churning rates on the mobile networks.
By the low connection rate (sometimes zero connection rate), the networks often attract subscribers, who are not able to recharge their phones. This increases the rate at which they dump the lines or shop for another service provider.