By Obinna Chima
In line with its monetary tightening stance, the Central Bank of Nigeria (CBN) will this Wednesday, mop up a total of N142 billion through the sale of treasury bills. The banking sector regulator issues treasury bills to reduce the volume of money supply in the system, a bid to control inflation.
The bank in a notice revealed that tenor for the bills would range between three month and one year. Specifically, the CBN said it would issue N32.057 billion 91-day paper, N50 billion in 182-day bill and N60 billion in 364-day bills at its Dutch auction.
It said: “Each bid must be in multiple of N1, 000 subject to a minimum of N10, 000. Authorised money market dealers are allowed to submit multiple bids. A bid may be authorised for money market dealers own account, non-money market dealers or interested members of the public. The bank reserves the right to vary the amount on offer in line with market realities prevailing as at the period of auction of the Nigerian Treasury Bills.”
The Nigerian Interbank Offered Rates (NIBOR) rose sharply to an average of 18.41 per cent on Friday, as against the 15.16 per cent it attained the preceding week as banks adjusted rates due to the hike of the cash reserve ratio (CRR). The Monetary Policy Committee (MPC), had at its last meeting, raised the CRR to 12 per cent from eight percent. But it had left other monetary policy tools unchanged.
Accordingly, THISDAY had reported that banks were compelled to adjust their rates so as to accommodate the new CRR. Also, data made available by the Financial Market Dealers Association (FMDA) showed that various tenors of the NIBOR edged higher last week.
For instance, while the call (overnight) tenor climbed to 17.50 per cent on Friday, from 14.08 per cent the preceding Friday, the 7-day tenor also jumped to 17.96 per cent as at Friday, from the 14.42 per cent the preceding week. Similarly, just as the 30-day tenor rose to 18.21 per cent on Friday, from 14.96 per cent, the 60-day tenor also stood at 18.50 per cent, from 15.17 per cent the week before. The Open Buy Back (OBB) rate also closed at 17.04 per cent, from 13.62 per cent.
Some dealers, however, said that the CBN’s latest guideline on repurchase transactions could have also drained liquidity from the market last week.
The performance of the naira against the dollar last week was mixed. For instance, at the interbank segment, the local currency fell by 40 kobo to close at N161.60 to a dollar on Friday, lower than the N161.20 to a dollar it closed the preceding Friday. Similarly, at the CBN’s bi-weekly auction, the naira slipped by two kobo to close at N155.86 to a dollar, over the N155.84 to a dollar it closed the preceding Friday.
The CBN offered a total of $500 million last week, lower than the $550 million it offered the preceding week. However, in the parallel market, the naira gained 50 kobo to close at N163 to a dollar, higher than the N163.50 to a dollar at which sold the preceding Friday.
But with improved sentiments observed in the global economy last week, which led to a rise in crude oil prices and Nigeria’s forex reserves, analysts forecast a marginal improvement in the naira against the greenback this week.
Nigeria’s foreign exchange reserves stood at $36.547 billion on Friday. Brent crude also gained $1.40 cents to $107.30 per barrel on Friday.
Advisers for Nationalised Banks
The Asset Management Corporation of Nigeria (AMCON) last week said it would announce the names of financial advisers for Enterprise Bank Limited, Keystone Bank Limited and Mainstreet Bank Limited today. The financial advisers are expected to undertake due diligence and valuation of the three banks and advise the corporation on the best strategy for selling them to the private sector.
Managing Director/Chief Executive Officer, AMCON, Mr. Mustapha Chike-Obi, however, declined to reveal identities of the 11 financial advisers selected for the banks, but reiterated that the corporation would ensure that only credible and professional institutions were appointed.
“Some of the firms are local while others are international institutions and we ensured that we got the best for the banks. We don’t want anybody to think that these banks were taken over and handed over to special interests. It must be a very transparent process,” he said.
He stressed that AMCON was not in a hurry to sell the commercial banks, stating that the advisers would value the assets and liabilities of the institutions.
$600 million Eurobond
The federal government last week said it might issue another Eurobond worth about $600 million next year. Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, had explained that the debt instrument could have a “Diaspora component”.
The minister said: “We will have a larger bond issue but we may decide that a portion of that should be directed to the Diaspora. We have to watch what is happening with the global markets. We want to make sure that we float this at a time when it will be successful.”
Okonjo-Iweala had reiterated that the federal government was working towards reducing domestic borrowing due to high interest rates in the country. She also restated the government’s intention to launch a sinking fund to retire maturing bonds, maintaining that it was aimed at bringing domestic borrowing down to N500 billion a year in the medium term, from N744 billion this year
Judgement against Akingbola
A High Court of Justice, Queen’s Bench Division, London last week ordered the former Managing Director of the defunct Intercontinental Bank Plc (now Access Bank Plc), Mr. Erastus Akingbola, to pay Access Bank Plc £654 million (about N164 billion) for the sharp and fraudulent practices committed when he was in charge of the bank.
The money, according to the judge, was purportedly stolen directly from the bank and used by Akingbola during his tenure to buy property in the United Kingdom and pay debts owed by his companies, among other uses. Of the amount, £9 million has already been refunded by Akingbola to Access Bank. But Akingbola, in reaction, faulted the ruling.
Fitch on Nigerian Banks
Fitch, a leading ratings agency, last week said that a lot of Nigerian banks do not have the appropriate capital required to operate in the country’s difficult environment. Director at Fitch's Financial Institutions team, Denzil De Bie, said: “Fitch considers that many Nigerian banks have thin levels of Fitch Core Capital (FCC), which are lower than is appropriate for Nigeria's difficult operating environment. The FCC calculation makes a whole range of adjustments to banks’ reported equity in order arrive at a comparable measure of a bank’s highest-quality ‘going-concern’ capital.
Continuing, Fitch pointed out that recent rapid credit growth in the Nigerian banking sector may give rise to weakened asset quality and higher impairment charges if left unchecked. “There was a marked improvement in banks' asset quality during 2011 following the sale of problem loans to the AMCON. However, rapid underlying credit growth of 30 per cent and 66 per cent was evident in most of the Fitch-rated banks in 2011 which the agency considers will be a negative credit driver if it continues.”
FCMB, FinBank Integration
First City Monument Bank Plc (FCMB) last week said it would complete its business combination arrangement with the former FinBank which it acquired last year before the end of this quarter. Managing Director/Chief Executive Officer, FCMB, Mr. Ladi Balogun, said the commercial bank had gotten approval in principle from the Securities and Exchange Commission (SEC) on the deal. Balogun explained: “We took full control of Finbank on February 9, and complete integration is on the way, it will happen by the end of the third quarter.”
Revised Guideline for Repo
The CBN last week warned that authorised dealers were prohibited from accessing the Wholesale Dutch Auction System (WDAS) whenever they have a repurchase agreement or a Standing Lending Facility (SLF) with the apex bank.
The CBN, in a circular, explained: “Further to the prohibition of authorised dealers from accessing the WDAs and the Standing Lending Facility (SLF) on the same day, authorised dealers are henceforth not allowed to access the WDAS window throughout the term of a repurchase or SLF transaction with the CBN.”