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Asset Management Company Comes On Stream … As Stocks Begin To Rally

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The Central Bank of Nigeria (CBN) has set up a technical team to value bad bank loans that will be purchased by the new Asset Management Company (AMC) which comes on stream this month. The CBN and finance ministry have finalised plans for the take-off of the asset management firm which will buy up non-performing loans in exchange for government bonds in order to free up banks’ balance sheets.

In fact, analysts have posited that the impact on liquidity might spur the Central Bank of Nigeria (CBN) into embarking on excess liquidity mop up or a likely hike in Monetary Policy Rate (MPR) in its July Monetary Policy Committee (MPC) meeting.

According to Bismarck Rewane, chief executive of Financial Derivatives Company Limited, in its May report presented at the Monthly Lagos Business School Meeting, short recovery is expected in the next couple of weeks as market bounces back from current low as a result of expected liquidity inflow.

Razia Khan, regional head of research, Africa Standard Bank, said the recovery of oil prices and output, creation of the AMC, and government’s spending plans ahead of elections in 2011 will all add to money supply. She, however, said recovery will be short-lived due to expected increase in interest rates, and further pressure on exchange rate as the holiday season approaches.

“Expect to see a lull in market activity in the summer months, while intervention by regulatory agencies on the broker-dealer community may reduce activities on the stock exchange and introduce further downwards pressure”, she said.

According to Khan, so far the stock market has been showing strong correlation with interest rate environment. For instance, high interest rate volatility has contributed to the volatility in the stock market, with the stock market benefiting from depressed rate environment as investors sought higher yields. In fact, the analysts are sure the apex bank may tinker with the idea of raising rates in its July meeting due to growing money supply.

Khan is, however, optimistic that the fixed income market (a market for trading bonds and other preferred stocks) will benefit as corporate bonds will be issued at higher yields.

For instance, N80 billion FGN bond was sold in the month of May. Similarly, a N25 billion was sold at the 3-year bond end of the market at a yield of 5.5 per cent, while another N25 billion was sold at the 5-year end of the market at 4.0 percent. The N30 billion was sold at the 20-year at 8.5 per cent. Successful bids for the three, five and 10-year offers were allotted at the marginal rate of 8.25 percent, 9.00 per cent and 10.00 per cent.

On how the CBN had fared in one year of Lamido Sanusi’s stewardship as governor, Khan said the apex bank is likely to be encouraged to continue its unbundling of universal banking.

 She expects further regulation of banking entities and consolidated supervision to intensify in the coming years. However, she identified some policy challenges such as fiscal dominance and indiscipline at the sub-national government level, and temptation to bleed the Excess Crude Account (ECA) as areas to watch out for.

Others include ensuring an orderly succession at the Nigerian Stock Exchange (NSE), weeding out the insolvent and insidious broker/dealers and sanitising the capital market. The House of Representatives signed a harmonised bill on Thursday, while the Senate is expected to vote on the legislation when it resumes work on June 22. “The central bank and the finance ministry have already set up technical teams that are doing implementation,” Central Bank governor, Lamido Sanusi told CNBC Africa television.

“We are looking at the toxic assets, we are looking at the value of the collateral, we are working on valuation models.” With bad loans off banks’ books, CBN hopes financial institutions will resume lending which had ceased since last year’s $4 billion bail-out of nine weak lenders.

“We will have a return to credit growth. It will be gradual but this time it is hopefully going to be sustainable,” Sanusi said. The central bank wants new investors to recapitalise the rescued lenders but they are unlikely to do so until after the AMC purchases the bad loans.

“By the time we have done the M & A (mergers and acquisitions), taken off the toxic assets and gone through a recapitalisation process, the supply side of credit will improve,” he said.

Sanusi also raised concerns over the state of the troubled airline industry and its potential impact on the banking system. “Every airline in the country seems to have non-performing loans,” he said. “One airline, for instance, owes a bank over N100 billion. Now that is enough to wipe out the entire capital of the bank.”

CBN is already extending a N500 billion fund meant to stimulate credit to the power and manufacturing sectors to airlines.

Meanwhile, after a round of profit taking precipitated a recent downturn in stock values, Nigeria’s stock market will begin a sustained rebound with the commencement of AMC as stock prices are expected to start an ascent in value, analysts have predicted.

The coming on stream of the AMC coincides with the expected rise in government spending, occasioned by federal government’s lining up of a supplementary budget to take care of certain overheads by ministries, departments and agencies (MDAs). This will increase the spending capacity of civil servants and, in turn, boost activities at the stock market.

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Army Chief Lauds NIMASA Boss Over Performance

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The Chief of Army Staff (COAS), Lt Gen Faruq Yahaya, has commended the Director General of Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh, over his efforts in transforming and promoting the transportation sector as president of the Chartered Institute of Transport Administration of Nigeria (CIoTA).
He gave the commendation recently, during the 4th National Transport Summit of the Institute in Abuja.
Yahaya, who was represented by Maj. Gen. E. Akerejola, commended the President and members of CIoTA for the many economic sectors it touched: from facilitating international trade, through supporting food security, to enabling industrial and infrastructural development.
In the same vein, the Nigerian Army and other security agencies pledged their support to the growth and improvement of the country’s transportation sector to international standards, expressing their willingness to collaborate with CIoTA to achieve this feat.
The COAS stated that the theme of the summit, “Transport Safety and Security Administration in Nigeria”, was also timely, saying it is “an important aspect of the Transportation sector which has often been overlooked by many, including the transport professionals and academia.
“Over the years, the transportation sector has witnessed series of issues and challenges ranging from poor infrastructure, poor regulations, limited specialised professional training institutions, lack of effective and efficient transport policies, intra industry squabbles among transport professionals, to unethical behaviours, poor working condition amongst others,” he said.
He reassured the Institute of the Nigerian Army’s resolve to support the transportation sector wherever necessary.
On his part, President CIoTA and DG of NIMASA, Dr. Bashir Jamoh, whose speech was read by Prof Samuel Odewumi, noted that the theme for this year’s summit is focused on safety and security of the transportation sector in Nigeria.
In his words: “We were able to achieve the Chartering of the Institute, Renewed Advocacy, Vigorous Membership Drive and Certification. This year’s summit focuses on Safety & Security on all modes of transportation, hence we must all work together as stakeholders and custodians of the transportation sector of Nigeria.
“Safety and security are paramount to achieving a robust and intermodal transport regime in Nigeria.
“CIoTA as the only statutory professional association in charge of the Transportation Industry in Nigeria, therefore, deserves to be accorded its place in nomination of members into relevant agencies and in consultations for policy formulation and implementation strategies. It is the right thing to do.
“As a Chartered Institute, our role is very huge; with great opportunities and challenges. Let’s focus on the job at hand”.

By: Nkpemenyie Mcdominic, Lagos

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Revenue Challenges: DMO Sues For Efficient Tax Administration

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As part of efforts to tackle revenue change in the country, the Debt Management Office (DMO) has called for the operation of an efficient and effective tax administration in Nigeria
Director-General of the agency, Ms Patience Oniha, who made the call in a statement made available to journalists, stressed on the need for Nigeria to operate such efficient tax administration system, that will tackle loopholes in revenue generation of the country.
According to her, a lot of loopholes are noticeable in the current tax system, which has given room for evasions and all sorts of sharp practices, causing hiccups in the public revenue management system.
She said revenue challenge remains one of the most critical policy issues of the Federal Government which is currently threatening the nation’s debt sustainability.
“The country needs to operate an efficient tax administration that would ensure greater compliance to remittances devoid of all forms of evasions in the system,” she said.
Recall that the current revenue problem is compounded by leakages such as an increase in oil theft and petrol subsidy, both of which have significantly reduced the revenue from oil sales that used to account for the bulk of government revenue.
Oniha noted that the outlook of both the local and international markets was becoming tighter with rising interest rate.
The DMO boss, therefore, stressed the need for the country to urgently moderate its new borrowings and ensure that public debt is sustained by accelerating its revenue base to shore up non-oil revenue and rationalising expenditure of the nation.

By: Corlins Walter

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214m Persons Subscribe To Telecoms In Nigeria

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Active telecommunication subscribers in Nigeria have now increased to 214.35 million as at October this year, according to data from the Nigerian Communications Commission (NCC).
The latest NCC statistical records so far obtained shows that this is the highest number of recorded telecoms subscribers in the nation since the total number of subscribers peaked at 207.58 million in October 2020, some months before the SIM-NIN linkage.
The record has revealed that more subscribers were getting new SIMs in a bid to circumvent restrictions on SIMs that had not been linked with their National Identification Numbers, which was the major reason for the growth in 2022.
One of the major service providers in Nigeria, MTN, in its  third quarter release through the Chief Executive Officer, Karl Toriola, said the average daily gross connection was 48.1 per cent above the pre-directive level, partly driven by the cohort of subscribers who were initially restricted and opted to register new SIMs.
“Combined with increased usage from the existing base, these have supported an acceleration in the service revenue growth recovery and mitigated the impact of churn on the base”, he said.
Also looking at the predictions in the industry among the global industry’s stakeholders, Nigeria has a sizeable number of its population under the age of 18, which is indicating that its subscriber growth would remain strong for the foreseeable future as more young consumers crossed into adulthood and subscribed to mobile services.
Given the growing population, it is expected that 18 million new Nigerians will become unique telecoms subscribers even by 2025, and as Mobile connectivity is at the core of connectivity in Nigeria, with the majority of online services accessed through mobile channels in the nation.
Records have shown that mobile ecosystem also supported more than 3.2 million jobs (directly and indirectly) and made a substantial contribution to the funding of the public sector, with $16bn raised through taxes on the sector, and this will grow in coming years.
However, inspire of this growth, many will not have access to telecom service, just as the Federal Ministry of Communications and Digital Economy had said that about 31.6 million Nigerians live in areas without telecoms coverage.
The absence of such coverage, according to the ministry, had enabled criminal activities and insecurity in these unserved areas to thrive.

By: Corlins Walter

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