Cost of Funds Reduce on Net Inflow

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The cost of lending among commercial banks in the country fell to an average of 14.60 per cent on Friday, compared with the 16.82 per cent it

The cost of lending among commercial banks in the country fell to an average of 14.60 per cent on Friday, compared with the 16.82 per cent it attained the preceding Friday, due to inflow of cash into the system.

Dealers said the character exhibited by the interbank lending was influenced by the injection of some portion of December's federation allocation to some government ministries, departments and agencies.

Data made available by the Financial Market Dealers Association (FMDA) revealed that whereas the overnight tenor plummeted by 275 basis points to 13.25 per cent on Friday, compared with the 16 per cent it was the preceding Friday, the 7-day tenor also reduced by 254 basis points to 13.75 per cent on Friday, as against the 16.29 per cent it recorded the preceding Friday.

In the same vein, while the 30-day placement period fell by 237 basis points to 14.21 per cent on Friday, from 16.58 per cent the preceding Friday, the 60-day tenor also reduced by 229 basis points to 14.58 per cent on Friday, from 16.87 per cent the preceding Friday. The 90-tenor also closed at 15.08 per cent, while the 180-day tenor dropped to 15.33 per cent.

The secured Open Buy Back (OBB) eased to 12.58 per cent on Friday, from 14 per cent the preceding Friday, 58 basis points above the Central bank's benchmark interest rate of 12 per cent benchmark rate.

Analysts predicted that the liquidity position of the market might shrink this week and might necessitate a rise in interbank lending rates because of the planned Open Market Operation (OMO) by the Central Bank of Nigeria (CBN) this Wednesday. The apex bank intends to auction treasury bills worth N149.27 billion at the first session of its bi-monthly treasury bills auction this Wednesday.

However, the money market would not open today  because of the public holiday that had been declared by the federal government to celebrate the Id-el Maulud

Forex Transactions
The naira strengthened against the dollar at the interbank market by N1 to close at N160.35 to a dollar on the interbank market on Friday, compared with the N161.35 to a dollar it stood last Monday. Similarly, the local currency was upbeat against the dollar at the CBN’s Wholesale Dutch Auction System (WDAS) last week due to forex inflow from multinational oil firm at the interbank market.

In fact, the local currency jumped by 15 kobo at the bi-weekly auction to close at N156.70 to a dollar on Wednesday, higher than the N156.85 to a dollar of the preceding Wednesday’s auction.

The apex bank offered a total of $500 million at the two sessions held last week. Forex auction at the official market will not hold today because of the public holiday.

MPC Decision
The CBN’s Monetary Policy Committee (MPC) last week retained the Monetary Policy Rate (MPR), the benchmark interest rate at 12 per cent with interest rate corridor of +/- 200 basis points.

The CBN Governor, Mallam Sanusi Lamido Sanusi had said that the committee decided to leave Cash Reserve Ratio (CRR) and the minimum liquidity Ratio at 8.0 per cent and 30.0 per cent respectively.

It had also maintained the mid-point of exchange rate at N155/$1 with a band of +/-3.0 per cent, and had noted that the outlook for oil prices in the short-term as well as the forecast demand/supply balance, suggested that the current exchange rate band should be retained while still achieving moderate continuous accretion to reserves.

On the external sector developments, the committee had regretted that despite the higher oil price in 2011, the country’s  Foreign exchange reserves was more or less flat at $ 32.64 billion as at end December 2011 compared to $32.34 billion as at end December 2010.

It had noted: “Notwithstanding the high prices of Nigeria’s reference crude oil (Bonny Light) which averaged US$106.32 per barrel for the year, the limited accretion to external reserves was due to the high demand for foreign exchange in the market.”

Partial Subsidy
Sanusi had said that the partial removal of subsidy was very positive for reserves and for the exchange rates, adding that the extra demand that was fuelling the subsidy given to West African countries would come down and in addition to that.

He had said the focus at the moment was to build-up the reserves in the event of a shock in the global economy adding that “what we would like to do is keep the rate (foreign exchange) stable while building up reserves to protect the economy in the event of any shock.”
He had noted that the long-term benefits far outweighed the likely short term costs as far as inflation is concerned.

Oil Benchmark Review
The CBN last week kicked against plans by the National Assembly to adjust the budget benchmark price of oil from $70 per barrel to $75 or $80 per barrel. The apex bank had warned that the review could pave way for further tightening of monetary policy and continued depletion of the Excess Crude Account (ECA) this year.

The CBN had explained that such measure was capable of stimulating remarkable increase in expenditure amidst the already high oil output assumptions.

Sanusi, who read the Communiqué No. 81 of the MPC, said the committee strongly supported the recommendations of the executive arm of government for a benchmark price of a maximum of $70 per barrel because the proposed review could further increase the inflationary pressure which is already in place on the supply-side.

The CBN governor had urged the government should also increase its focus on both technical and vocational education for Nigerians in order to produce a labour force that would be compatible with the current stage of the country’s development, in addition to its current reforms.

FG Revenue
The cumulative federally-collected revenue between January and October 2011 stood at N9.230 trillion, a report by the CBN had said. The report had explained that the above mentioned value, reflected increase of 20.2 and 55.7 per cent over the budget estimate and actual receipts in the corresponding period of 2010, respectively.

On the other hand, the gross federally-collected revenue for the month of October 2011 alone, stood at N1.143 trillion. The amount, according to the regulator, represented an increase of 48.8 per cent over the monthly budget estimate, but lower than the receipts in the preceding month by 0.5 per cent.

It had added: “The decline in oil receipts relative to the level in the preceding period was attributed, to the decline in Petroleum Profit Tax (PPT) and Royalties. Non-oil receipts, at N239.1 billion (20.9 per cent of the gross federally collected revenue), exceeded both the monthly budget estimate and the level in the preceding month by 19.4 and 0.8 per cent, respectively.”

Investment Commitment
The Federal Government last week revealed that it had secured a total of N4.89 trillion investment commitments from local and foreign investors in the last six months. According to the Ministry of Trade and Investment, of the amount, local investors accounted for N2.67 trillion while the remaining N2.22 trillion would come from foreign investors.

Minister of Trade and Investment, Mr. Olusegun Aganga, had said that the investment commitments were secured from the over 60 investor meetings held at home and abroad in line with the ministry’s aggressive investment drive and the transformation agenda of the President Goodluck Jonathan’s administration.

According to him, a breakdown of proposed investments from foreign companies showed that an American company, Vulcan Energy International, had finalised plans to invest N620 billion in the oil and gas sector of the Nigerian economy within the next one year.

He had said GE Healthcare (United Kingdom) and GE Electric (United States) had also made a combined investment proposal of N379.12 billion for the health and transport sectors of the economy.

Continental Free Trade Zone
President Goodluck Jonathan last week, canvassed the speedy implementation of the Continental Free Trade Zone.
Speaking at the ordinary session of the Assembly of Heads of State and Government of African Union (AU), Jonathan had told the United Nations Secretary General, Ban Ki-moon, that the period of the petrol subsidy removal protest was a tasking one for him, adding however, that it was a difficult decision he had to take to save Nigeria from future pains.

He had also promised to take up oil spill compensation issues with Shell Petroleum Development Company (SPDC) with a view to amicably resolving it. He had called for the strengthening and the replication of Regional Economic Communities which has enhanced free movement of trade and services so as to increase the volume of trade among African countries which was a precursor to the continued economic growth.

Cash-less Policy
The Group Managing Director /Chief Executive of Union Bank of Nigeria Plc, Mrs. Funke Osibodu, last week said the new cash-less  policy would go a long way to reduce activities of money laundering in the system.

Therefore, had Osibodu advised the Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN), to adhere to international standards as they grapple with the challenges.

According to the Union Bank, the negative perception and threat to blacklist Nigeria in the global financial market had stemmed from non-adherence to anti-money laundering and countering financing terrorism laws.
She had argued that for the country to change such perception, the compliance function in different banks needed to be enhanced and made more stringent even as they participate in the international AML/CFT programmes so as to appreciate the country’s stance against money laundering.

She had canvassed  shared experience and robust discussions amongst all stakeholders on the cash-less policy.

Cottage Industries
The Federal Government last week announced plans to establish a solid mineral-based cottage industry in each of the 774 local government areas of the country. The move, the government had said, was part of its transformation agenda on job and wealth creation.

Minister of Mines and Steel Development, Alhaji Musa Mohammed Sada, had said that the pilot programme would take off from one local government area in Bauchi State before other local government areas across the country.

Sada had said the issue of illegal mining across the country was being addressed to protect lives, generate revenue, the environment and to attract foreign direct investment and local investors to the mining industry.