By Obinna Chima
In line with its tight monetary policy regime, the Central Bank Nigeria (CBN) at the weekend withdrew a total of N127.97 billion naira from the system, through sale of treasury bills (T-bills).
The CBN sold N32.488 billion of 91-day T-bills at a yield of 11.95 percent. The central bank also sold N24.155 billion of 182-day debt at 11.98 per cent and N71.326 billion of 364-day bills at 11.98 percent.
A total bid of N391.7 billion was recorded even as yields were said to have declined to the lowest in 14 months.
Auctioning T-bills helps in reducing the volume of money supply in the system, because the liquidity management office accepts money in return for purchase of securities, and keeps the money out of circulation.
The Nigerian Interbank Offered Rates (NIBOR) climbed marginally to an average of 13.42 per cent on Friday, compared to the 13.20 per cent it attained the preceding Friday as the volume of liquidity inflow matched outflow from the system. Data compiled from the Financial Market Dealers Association (FMDA) showed that while the overnight tenor leapt to 12 per cent on Friday, from 11.71 per cent the preceding Friday, the 7-day tenor also climbed to 12.37 per cent on Friday, from 12.25 per cent the preceding Friday.
In the same vein, whereas the 30-day tenor advanced to 13.04 per cent on Friday, from 13 per cent, the 60-day tenor also increased to 13.53 per cent, from 13.50 per cent the preceding Friday.
The CBN slashed the amount of dollar offered at its regulated Wholesale Dutch Auction System (WDAS) last week by 35 per cent, due to moderate demand for the greenback. Specifically, the apex bank offered a total of $260 million last week, compared to a total of $400 million the preceding week. However, the value of the naira against the dollar at the WDAS, which is also referred to as the official market was stable at N155.76 to a dollar. But at the interbank market, the naira appreciated by 20 kobo to close at N157.10 to a dollar on Friday, compared to the N157.30 to a dollar it attained the preceding Friday. The local currency was however stable at the parallel market as it maintained its value of N159 to a dollar.
CBN Governor, Mallam Sanusi Lamido Sanusi, restated last week that the monetary tightening policy had largely achieved its objectives of stabilising the naira and taming inflation, which were less of a worry than four months ago. Sanusi also reiterated his concern that oil prices could fall due to global economic uncertainty, posing risk for the country.
"It is clear the objectives we set for ourselves when we tightened have been largely achieved," Sanusi said, adding: "We have stabilised the exchange rate and we have stopped inflation from spiking. Core inflation has come down for the fourth consecutive month."
"There are underlying widespread pressures on imported food inflation. But in terms of where we were four to five months ago, the concerns are more muted," Sanusi said.
Sanusi last week also said that it had become impossible for the country to develop under the current constitution unless it is amended.
He said the present political structure was a drain on national resources. The CBN governor also blamed high interest rates on the cost of corruption and leakages in the system, adding, however, that the current cost of borrowing was not responsible for the lack of credit to farmers.
Sanusi said: “Salaries and wages are paid not just to civil servants. This is a country where we have 774 local governments, in each council you have a chairman and a vice chairman and maybe ten councillors plus their aides.”
Concerned by the inability of most microfinance banks (MFBs) to pay their deposit insurance premium, the Nigeria Deposit Insurance Corporation (NDIC) last week said it would collaborate with the CBN next year, to close down defaulting MFBs. Managing Director/Chief Executive Officer, NDIC, Mr. Umaru Ibrahim, disclosed that the corporation collected a total of N980.79 million as premium from 698 MFBs and Primary Mortgage Institutions (PMIs) as at September 30. This, he said, represented a decline by 8.02 per cent, compared to the N1.066 billion collected from 765 MFBs and PMIs as at 2011.
“A problem in premium collection is in the area of MFBs. A lot of them are in arrears and some cannot even pay. But by next year, we will partner with the CBN to ensure that those of them that are not willing to continue are shown the way out and new one licensed,” the NDIC boss said.
Despite a marginal improvement over last year’s survey, Nigeria remained at the bottom of the heap on the global corruption index, having been ranked the 35th most corrupt country in the world by Transparency International (TI) in a report last week. In its 2012 report, the Washington DC-based body indicated that Nigeria scored 27 out of a maximum 100 marks to occupy the 139th place out of the 176 countries surveyed in the report. With the latest ranking, Nigeria moved up four places from its ranking of 143 out of the 183 nations surveyed by TI in 2011. The country was ranked 134 out of 178 surveyed nations in 2010; 130 out of 180 nations in 2009; 121 out of 180 in 2008; 147 out of 180 countries in 2007; and 153 out of 180 surveyed nations in 2006.
Bailout for Stockbrokers
The Federal Government last week unfolded measures aimed at resuscitating and checking abuses in the Nigerian capital market. The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said a forbearance of about N22.6 billion on the margin loans of 84 stockbrokers would be granted, in accordance with Section 6(5) of the Asset Management Corporation of Nigeria (AMCON) Act. Also, stamp duties and value added tax (VAT) on stock market transaction fees were also eliminated.
Okonjo-Iweala, who also backed the statement by Sanusi, on the need to reduce personnel in the public sector in order to cut back on recurrent spending, said there could be no reduction in the cost of governance without a cut in size of the current public workforce.
“Many of you are aware that activities on the Nigerian capital market, particularly the stock exchange, have been very slow in the aftermath of the global financial meltdown and the Nigerian banking crisis,” she added.
The forbearance, she said, would remove the heavy burden and allow the brokers to fully re-enter and re-invest in the market, and make the market more vibrant.
The NDIC also said last week that it had solicited for assistance from the World Bank, to enable it develop a framework that will be used in determining the strength of its Deposit Insurance Fund (DIF). DIFs are funds set aside to pay back the money lost due to the failure of a financial institution.
Ibrahim explained: “The size of our DIF relative to the quantum of insured deposits in the system leaves much to be desired, as the adequacy of our DIF is still not properly ascertained using the Target Fund Ration in line with the best practice. However, the corporation is currently pursuing aid from the World Bank to enable it develop a framework for the computation of Target Fund Ratio and using it in determining the adequacy of our DIF.”