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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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Firm Launches New Radio Campaign For Product

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An oil and gas firm, 11 Plc, has launched a new jingle for its mobil super lubricants.
The firm in a statement recently indicated that it is the sole distributor of Mobil fuel and lubricant brands in Nigeria, noting that the radio campaign was aimed at making the brand Nigerian customers’ choice.
“The campaign, which hit the airwaves three weeks ago, was launched to create fresh awareness for all category users of the premium lubricants during the Easter and Ramadan period and beyond”, the statement said.
According to the firm, Mobil Superbrand is a global family of premium passenger vehicle engine oils that provides different levels of protection to match whatever conditions users of the products may encounter.
The company said its vision was to be the number one business group in Nigeria in terms of sustained service, quality and reliability and the first brand of preference by the consumers whilst conducting operations with high safety standards and environmental compliance.
It added that it aimed to provide the best in class products, services and solutions to customers with a focus on safety and environmental standards.

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Arik Air Explains Flight Cancellation In PH Airport

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Arik Airline has clarified that the incident that resulted in passengers getting stranded at Port Harcourt Airport last Tuesday was due to adverse weather conditions.
This was disclosed in a statement signed by the Public Relations Manager of the airline, Adebanji Ola.
Some passengers of the Arik Air had expressed frustration over being left stranded at Port Harcourt Airport after their flight to Lagos was abruptly cancelled.
The affected passengers, scheduled for the flight from Port Harcourt to Lagos State, got upset by the development, and took to social media platforms to express their grievances.
Nevertheless, the airline had in the statement, reiterated its commitment to safety, highlighting its strict policy to avoid flying in inclement weather conditions, which they said had necessitated the cancellation of the affected flight.
It extended its apologies to customers whose travel plans were disrupted by the unforeseen circumstances, reaffirming its dedication to prioritising passenger welfare.
“We are aware of a recent story circulated in social media alleging that passengers were left stranded at Port Harcourt Airport under our care. It is imperative that we provide clarity on this matter to rectify any misconceptions.
“In the evening of Tuesday, April 2, 2024, our flight W3 744 Lagos-Port Harcourt was compelled to make an air return due to adverse weather conditions, specifically heavy rainfall and thunderstorms in Port Harcourt.
“Consequently, both the Lagos-Port Harcourt (W3 744) and Port Harcourt-Lagos (W3 745) flights had to be cancelled.
“It is crucial to note that by the time of the cancellation, our banking facilities at the airport had ceased operations, rendering funds unfeasible at that moment.
“However, the passengers were promptly briefed on the situation and advised to return the following day for re-protection on available flights”, it stated.
The statement added that on Wednesday, April 3, 2024, all the affected passengers from both Lagos and Port Harcourt were successfully accommodated on available morning and evening flights.

Corlins Walter

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Settlement On Course For Redundancy Benefits – Aero Airline 

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The Aero Contractors Airline has affirmed  its commitment to clear the remaining five per cent of redundancy benefits owed its workers.
Managing Director and Chief Executive Officer of the airline, Captain Ado Sanusi, in a press release said the firm was intensifying efforts to address outstanding financial commitments.
He faulted the move by workers union, the National Association of Aircraft Pilots and Engineers (NAAPE), to issue a press statement, despite ongoing efforts to resolve the issue amicably.
“This should not be an opportunity for disharmony, dialogue is a process. There was a letter written, there was a process agreed upon, and all of a sudden they went to the press. We are ready to resolve the issue”, the CEO stated.
NAAPE had recently issued a letter threatening to go on a protest over non-payment of outstanding redundancy benefits to its members.
The group accused the management of Aero Contractors of depriving the affected former workers access to their entitled benefits.
The protest letter, addressed to the management of the airline, read in part: “Consequent upon the avalanche of complaints received from our members who have been deprived of their fundamental entitlements and denied the rightful collection of their redundancy benefits in the last seven years and given the anguish and mental agonies suffered by them, We are compelled, as responsible representatives of these eminent men/women, including the dead, to protest through this letter and express our bitterness over management’s seeming lackadaisical attitude, insincerity and insensitivity to the continued wellbeing of these great Nigerians”.
The Aero CEO, however, clarified that in the last seven years, the company has paid approximately 95 per cent of the redundancy benefits.
“We should be given credit because this management initiated the process of paying off redundancy. We want our prospective investors to understand that we are a very responsible company, and we take our obligations seriously, not only for staff but also in other areas.
“We update them on a day-to-day basis to ensure business continuity. It is a very tough environment in which we are operating”, he said.
Sanusi stressed the importance of maintaining transparency and communication with stakeholders throughout the process.
He said despite challenges posed by fluctuating exchange rates and fuel costs, Aero Contractors remained steadfast in its efforts to uphold its obligations and ensure business continuity.

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