FAAC Funds’ Injection Lowers Interbank Rates

30 Apr 2012

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Minister of State for Finance, Alhaji Yerima Ngama

By Obinna Chima

Cost of funds amongst commercial banks in the country dropped significantly last to an average of 13.78 per cent on Friday, as against the 15.81 per cent it stood the preceding Friday.

This was largely attributed to the inflow of funds, disbursed among the three tiers of government by the Federation Account Allocation Committee (FAAC) the preceding week.

The Minister of State for Finance, Alhaji Yerima Ngama, had revealed that FAAC distributed N613.697 billion among the three-tiers of government for the month of March.

Ngama had stated that the total funds available for distribution in the month under review increased to N726.772 billion, exceeding the projected fund by N224.216 billion in terms of the 2012 budget as a result of higher price of crude oil.

The total amount shared included an accumulated exchange gain of N48.820 billion and N7.617 billion refunded by the Nigerian National Petroleum Corporation (NNPC) from its N450 billion debt to the federation account, he had explained.

Consequently, data made available by the Financial Market Dealers Association (FMDA), showed that while the Overnight (Call) tenor dropped to 11.83 per cent on Friday, from 14.62 per cent the preceding Friday, the 7-day tenor fell to 12.42 per cent on Friday, as against the 15 per cent it stood the preceding Friday.

Similarly, just as the 30-day tenor plummeted to 13.50 per cent on Friday, from 15.58 per cent the preceding Friday, the 60-day tenor also reduced to 13.96 per cent, from 15.83 per cent the preceding Friday.

The secured Open Buy Back (OBB) also dropped to 11.37 per cent on Friday, from 14.08 per cent the preceding Friday due to the perceived liquidity surge in the system.

Interbank markets generally are the private lender-of-last-resort for banks' short-term liquidity needs. Therefore, lack of adequate liquidity flow through the market has the potential to substantially impair the market as well as the economy.

Forex Transactions

At the Wholesale Dutch Auction System (WDAS), last week, the CBN offered a total of $240 million, while total sale stood at $230.5 million. The regulator did not disclose the amount demanded by dealers.

While the naira appreciated against the dollar at the WDAS, was stable at the parallel market, it depreciated in the interbank segment of the forex market. At the official market, the naira appreciated by 10kobo to close at N155.65 to a dollar, compared with the preceding week’s value of N155.75 to a dollar.

At the interbank market the naira depreciated by 35kobo to close at N157.60 to a dollar, compared to the preceding week’s value of N157.25 to a dollar. At the parallel market, the value of the naira remained stable as it closed at N158.80 to a dollar.

Treasury Bills Sales

FSDH Securities Limited revealed in its report at the weekend that at the 91-day Treasury Bill (TB) auction, a total of N34.89 billion worth of securities was offered and sold to competitive bidders, while a total of N16.39 billion was sold to non-competitive bidders.

This, it said, took total offer and sale to N51.28 billion. The bill, according to the report, was 187.33 per cent subscribed as N65.36 billion worth of bid was received from competitive bid. The bill was issued at a discount rate of 13.849 per cent.

The FSDH report explained further: “A total of N54.89 billion worth of matured bills was repaid into the system, leading to a net inflow of N3.61 billion from this segment of the market. At the 182-day TB auction, a total of N45 billion worth of securities was offered and sold to competitive bidders, while N2.22 billion was sold to non-competitive bidders, bringing total offer and sale to N47.22 billion.

“The bill was 354.96 per cent subscribed as N159.73 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 14.59 per cent. A total of N46.73 billion worth of matured bills was repaid into the system, leading to a net outflow of N490 million from this segment of the market.

“At the 364-day TB auction, a total of N60.73 billion worth of securities was offered and sold to competitive bidders, while N1.7 million was sold to non-competitive bidders, bringing total offer and sale to N60.732 billion. The bill was 518.03 per cent subscribed as N314.60 billion worth of bid was received from competitive bidders,” the report added.


Increase in prices of food as well as hike in prices of other commodities in the economy pushed the Composite Consumer Price Index (CPI), which measures inflation to 12.1 per cent year-on-year in March as against 11.9 per cent in February. The monthly composite CPI was higher by 1.6 per cent in the period under review when compared with the figure in February.

According to the Consumer Price Index analysis for March, released by the National Bureau of Statistics (NBS) last week, the rise in inflation was blamed partially on the planting season, which increased the price of food products in the market, as well as increase in prices in the economy.

However, it had stated that inflationary impact had been moderated by lack of liquidity in the economy occasion by the delay in the release of the monthly revenue allocation to the three-tiers of government by the FAAC. Urban inflation rate was 13.7 per cent year-on-year while the rural figure was 11.0 for March.

Subsidy Probe Report

The Federal Ministry of Finance has declared that the sack of two accounting and audit firms involved in the verification of fuel subsidy claims had no link with the report of the House of Representatives Ad hoc Committee on subsidy management, which unveiled its findings last week.

The Ministry of Finance had terminated the contract of  the accounting and auditing firms of Akintola Williams Deloitte and Adekanola & Co, for alleged failure to exercise due care in the audit of fuel subsidy claims they performed on behalf of  the Federal Government in the management of the Petroleum Support Fund (PSF).

In its defence, Akintola Williams Deloitte had said it acted professionally within its mandate and recovered N5.7 billion for the Federal Government from fuel marketers in the course of implementation of the contract, which the FG awarded to it through the Budget Office of the Federation (BOF).

SURE Programme

The Subsidy Reinvestment Programme (SURE–P) Committee, led by Dr. Christopher Kolade, last week said it had concluded its preliminary work and was now ready to commence the implementation of the programme aimed at showing to the country what the gains of subsidy removal on petrol can do.

Kolade had said what made his committee appear slow was because the programme was new and the committee was working out the templates which were now ready. Consequently, he had said they would now move faster with the implementations.

“All we have done today is to tell him how we are organising the work, how we are working with the other parts of the public service which are handling the projects. We have done that so that he knows what is going on. Everybody now knows how far we have gone and also knows about what we have done so far, so we are going back to build on that,” he had explained.

Hydro-power Plants

The federal government last week said it had commenced the process of establishing hydro-power plants in strategic areas in the country as part of efforts to reduce the operational costs of Small and Medium Enterprises (SMEs) in the country.

The FG had said that the move was part of efforts at improving the business operating environment in the country. The Minister of Trade and Investment, Mr. Olusegun Aganga, who made these remarks, also said that the federal government would get entrepreneurs to build small hydro-power plants, as quickly as possible, in areas where they could serve SMEs.

Aganga had said, “Now that we have embarked on the Industrialisation Revolution Plan, the role of BoI becomes more important. On hydro power plants for SMEs, we want to get this done as soon as ‘yesterday’. If there is no infrastructure, mainly power, the SMEs find it difficult to succeed.

“So, we must make the hydro power plant project successful. We will look at the locations and link them to industrial development centres. We will find a way of scaling this up, as quickly as possible, so that we can reduce the operational costs of our SMEs,” he added.

Lagos and Africa’s Devt

In her presentation at the 6th Lagos Economic Summit last week, the Vice-President, Africa Region, Standard Chartered Bank, London, Ms. Razia Khan, said Africa’s transformation was largely dependent on Lagos State, due to the growth recorded in the state in the past few years.

Khan had argued that there was clear disparity in the performance of states that were more dependent on oil revenue from the Federal Government and those that were less dependent on such funds, even as she called for a review of the policy of sharing oil revenue.

“Lagos economy has been able to move beyond the system whereby government is the focus daily. Lagos has shown that it is not about rent-seeking, but about a production economy.  To that extent, we should not underestimate what Lagos means,” Khan had said.

According to her, a lot of the enthusiasm about Nigeria’s growth is about the growth prospects in Lagos, adding that Lagos represents about 20 per cent of Nigeria’s Gross Domestic Product (GDP). She had argued that with the pace of development in the state, Nigeria had all it takes to be among the BRICS nations (Brazil, Russia, India, China and South Africa).

Global Food Targets

Developing nations are seriously lagging behind on global targets related to food and nutrition, the World Bank and the International Monetary Fund (IMF) said last week.

According to the institutions, rates of child and maternal mortality were still ‘unacceptably high’ in developing nations. Recent spike in international food prices had stalled progress across several of the Millennium Development Goals (MDGs), the report had said.

Regional progress towards the MDGs had been uneven. The report had also argued that while upper and middle income countries were on track to achieve most targets on the MDGs, low-income or fragile countries were lagging, with only two goals achieved or on-track. According to the World Bank/IMF, while food prices had declined from their 2011 peaks, commodity prices remain volatile.

Credit to Private Sector
Banking sector credit to the private sector increased significantly by 11.3 per cent to N14.207 trillion as at March this year, as against the 12.762 trillion it was the previous month, data obtained by THSIDAY had shown.

The latest money and credit statistics had indicated that the private sector grew by N1.445 trillion in the month in March. The CBN’s economic indicator had also shown that broad money (M2), which generally is made up of demand deposits at commercial banks and monies held in easily accessible accounts, stood at N13.225 trillion in the month under review.

Annual private sector credit growth remained robust at 50.7 per cent year-on-year in March, from 53.3 per cent year-on-year in February and 55.9 per cent year-on-year in January. 

Tags: Nigeria, Featured, Business, Yerima Ngama

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