Nigeria: CBN to Mop Up N172 Billion From Circulation

A notice from the regulator showed that the treasury bills which will range from 3-month to 1-year maturities will be auctioned at its regular bi-monthly debt auction scheduled for October 11.

A breakdown of the amount showed that while N30.16 billion of 91-day paper will be sold, N73.49 billion of 182-day bills and N68.18 billion in 364-day paper. Treasury bills are short-term debt obligation with maturity of less than one year. They are sold through a competitive bidding process.

NIBOR

The Nigerian Interbank Offered Rates (NIBOR) climbed to an average of 13.27 per cent on Friday, compared with the 12.96 per cent it attained the preceding Friday, due to outflow of funds for the purchase of bonds and forex.

Data made available by the Financial Market Dealers Association (FMDA) showed that while the Overnight tenor closed at 10.33 per cent on Friday, from 10.67 per cent the preceding Friday, the 7-day tenor closed at 10.75 per cent on Friday, from, 11.21 per cent the preceding Friday.

In the same vein, just as the 30-day tenor closed at 12.21 per cent on Friday, from 12.92 per cent the preceding Friday, the 60-day tenor also closed at 14.08 per cent, from 13.42 per cent the preceding Friday. The 90-day tenor also increased to 14.71 per cent, from 13.83 per cent the preceding Friday.

The market was said to have opened with a cash balance of N375 billion, compared with N226.6 billion the preceding week.

The secured Open Buy Back (OBB) stood at 10.23 per cent on Friday, 1.77 per cent lower than the benchmark interest rate of 12 per cent.

Forex Transactions

Only one session of the bi-weekly auction was held last week as a result of the public holiday to commemorate Nigeria's Independence. The apex bank offered a total of $200 million at last Wednesday session, compared with a total of $450 million the preceding week. At the bi-weekly auction, the naira appreciated marginally by 1 kobo to close at N155.77 to a dollar, compared with the N155.78 to a dollar it was the preceding week. It also gained 18 kobo at the interbank market to close at N157.12 to a dollar on Friday, from N157.30 to a dollar the preceding Friday. The local currency was however stable at the parallel market at N159 to a dollar.

Job Creation

A report by the Renaissance Capital (RenCap) last week described the high level of unemployment and the need to create jobs as the most challenging problem confronting the Nigerian economy. The report tagged: "Reforming the Unreformable-Lessons from Nigeria," attributed to the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had expressed concern over the increasing numbers of youths entering the job market.

According to the report, as much as a quarter of Nigeria's working age population aged 15 to 65 years, is not in the labour force, showing that 70 per cent of Nigeria 's 160 million people are 30 years of age or younger.

It had however said: "If Nigeria could create the needed number of jobs, it could turn this demographic dividend of a young working-age population into a development dividend."

This, it had argued, could be achieved by focusing on strengthening the macroeconomic framework, improving the investment climate, fighting corruption and completing structural reforms.

Pension Assets

Funds under the management of Pension Fund Administrators (PFAs) in the country have risen significantly from N265 billion in 2006 to N2.739 trillion this year, a report by Renaissance Capital (RenCap) showed last week. The report had said the amount includes seven 'closed' PFAs that already existed at an individual company level. It showed that the pension assets have maintained a steady growth of $2.5 billion yearly.

RenCap had explained: "Most interesting to us was the shift in asset allocation by pension funds over the past few years. In 2007, when equity prices were rising rapidly, 30 per cent of pension fund assets were in equities. The fall in equity markets in late 2008 and into 2009 caused that number to slump and, as of June 2012, just 10 per cent of pension fund assets were allocated to equities."

JP Morgan Index

Nigeria last week, joined the JP Morgan's Government Bond Index-Emerging Markets (GBI-EM) with the listing of FGN's bond, becoming the second African country after South Africa to be included in the widely-followed index.

The JP Morgan GBI-EM indices are comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging Market governments. The index was launched in June 2005 and is the first comprehensive global local Emerging Markets index. JP Morgan had said that the inclusion of FGN Bonds could translate into at least $1.5 billion of inflow to Nigeria's bond market. It will also raise the profile of Nigeria's debt market is expected to lead to greater foreign participation, given that Nigerian yields offer a significant premium to established sovereign lenders.

Emerging Markets Strategist, Standard Bank, Samir Gadio, had said: "It's now seen as a market that can't be ignored internationally and one of the frontier markets where you need to have a position."

Oil Benchmark Hike

The CBN Governor, Mallam Sanusi Lamido Sanusi, last week, faulted the proposal by the House of Representatives to raise the crude oil benchmark in the 2013-2015 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper. This was just as the executive arm of government is considering a new date for the presentation of the 2013 Appropriation Bill by President Goodluck Jonathan to the National Assembly.

The Joint Committee of the House on Finance and Legislative Budget and Research as well as Aids and Loans had recommended an upward review by $7 of the oil benchmark. The joint committee's proposal was hinged on the fact that increasing the benchmark will attract more revenue to the federation and assist government in reducing its deficit and borrowing. Sanusi had described the position of the lawmakers as erroneous. He had argued that raising the oil benchmark did not in any way translate to more revenue for the government because benchmarks were mere projections that could either be realised or not depending on the volatility of the price of oil.

Ibru's Assets

Justice Mohammed Idris of Federal High Court sitting in Ikoyi, Lagos, last week ordered the CBN to declare the whereabouts of the N191 billion in assets seized from the convicted former Managing Director of Oceanic Bank Plc (now Ecobank), Mrs. Cecilia Ibru. Delivering judgment in a suit filed by the President of Progressive Shareholders Association (PSA), Mr. Boniface Okezie, Justice Idris held that the order must be complied with within 72 hours. The judge had also ordered CBN to declare what it termed the total cash and value of property recovered from Ibru.

"The Central Bank of Nigeria is hereby ordered to declare the whereabouts of the money recovered from Cecilia Ibru; and what part of this cash and property has been returned to Oceanic Bank and/or its shareholders. What is done officially must be done according to the law," Idris had said.

Single Currency Facility Agreement

The Loan Market Association (LMA) last week announced the introduction of two new documents that focuses on growing international markets titled -Single Currency Term Facility Agreement intended for use in developing market jurisdictions and Single Currency Term Facility Agreement intended for use in pre-export finance transactions (PXF). The documents are designed for syndicated loan transactions- that is, a loan where two or more institutions contract to provide credit to a particular corporate or group. Such a facility tends to be more suited to medium to large borrowers, with borrowing requirements in excess of £50 million.

The LMA, which is the trade body for the syndicated loan markets in Europe, the Middle East and Africa (EMEA), had explained that both documents were created in response to demand from market participants who felt there was increased need for LMA-style recommended documentation in these markets