Africa News Online: NIGERIAN PRESIDENT UMARU YAR'ADUA IS DEAD

Africa News Online: NIGERIAN PRESIDENT UMARU YAR'ADUA IS DEAD

Nigeria's Banking Crisis. Govt admits failure

Against the backdrop of mounting criticisms surrounding the actions of the Central Bank of Nigeria (CBN) on the recently rescued banks, the Federal Government has decided to wade into the crisis with a view to restoring confidence in the sector.
Speaking in Abuja on Monday, the Minister of State for Finance, Mr. Remi Babalola, said the government wanted to exit banks rescued in a N620 bilion bailout earlier this year as quickly as possible.
According to Babalola, there was the urgent need to restore confidence in the sector, adding that a prolong crisis was not the best for the sector. “We urgently need to restore confidence. We are working together to get out (of the bank intervention) as early as possible. From our side, we don't want to stay for long.”

Nigeria's Federal Government to exit bailed out Banks quickly

The Federal Government of Nigeria is to exit banks rescued in a $4 billion bailout earlier this year as quickly as possible, Minister of State for Finance, Remi Babalola, said on Monday. “We urgently need to restore confidence. We are working together to get out (of the bank intervention) as early as possible. From our side, we don’t want to stay for long,” he told a press briefing in Abuja. Nigeria has injected about N600 billion ($4 billion) into the banking system since mid-August, bailing out nine banks found to be so weakly capitalised that they posed a systemic risk to sub-Saharan Africa’s second biggest economy.

BANKS DIRECT SUBSIDIARIES TO OFFLOAD STOCKS AHEAD OF CBN AUDIT

Banks direct subsidiaries to offload stocks ahead of CBN audit

There are strong indications that Nigerian banks may have directed their subsidiaries to start offloading their massive holdings in quoted stocks as a way of mitigating their exposures to the stock market and beef up assets ahead of the proposed audit by the Central Bank of Nigeria (CBN).
A review of trading summary of the Nigerian Stock Exchange (NSE) showed that stocks are falling victims to the uncertainty that has been created by recent statements credited to the CBN governor, Sanusi Lamido Sanusi.
Market capitalisation of the Exchange for instance dropped by N224 billion yesterday from N6.365 trillion to N6.141 trillion, bringing total losses in two days to N387 billion.
Twenty one banks droped in value at the NSE yesterday.
A stockbroker confided in BusinessDay yesterday that most of the trades in the market came from the banks’ subsidiaries that have been offloading stocks based on instructions from their parent banks that they should get out of such stocks to reduce their positions.
It was gathered that the banks also see this as an opportunity to take profits from recent gains in the market and further beef up their assets class.
Banks’ stocks have rallied hard since last month’s lows. But as of Tuesday, the bears returned with a jolt, in spite of nothing being materially different from last week when some of the banks’ results were greeted with successive cheers.
Sanusi’s statement is seen as a stark reminder of how much the banks are still suffering as a result of their exposures to margin loans, downstream oil sector, real estate financing and the telecoms sector.
As it is, the banks are beginning to wake up to the CBN governor’s “stress tests” just after the market started to grow again and as they do that, individual investors are quickly jumping into the frenzy.
The problem, according to some analysts, is that the CBN stress test cannot benefit holders of banks shares because the issues that matter are asset values and level of banks capital.
They insist that the development may affect the level of returns from the banking sector in terms of dividends and other benefits that investors are looking forward to.
Femi Oyebola, a market analyst maintained that the CBN governor may have rattled the market but only in institutions that are perceived to be weak. “What he has succeeded in doing is to create uncertainty in the market and markets hate uncertainty. I would not say he is the major cause of the market downturn. But as they say, empty vessels make the most noise and those banks with the loudest trumpet seemed to have been the ones taking excessive risks in terms of margin loans, downstream oil and property financing”.
Another observer of this unfolding event assured that most banks will definitely declare losses by December ending if Sanusi insists that they make full disclosures and write off their share linked loans.
Meanwhile, it has been suggested that Sanusi should ensure that the banks disclose subsidiaries exposure as it relates to the banks’ percentage in the company and provide for them too. In simple terms, inter company accounts should be scrutinised and how many shares of the bank the subsidiary holds too.
Analysts at Afrinvest West Africa in its Banking Sector report for 2009 noted that “given the degree of uncertainty across most core business areas, we expect that 2009 will be a year focused on internal operating efficiency, active loan book management, and a migration of balance sheets back towards liquid assets. We also expect that tighter regulatory oversight, competitive funding costs, and greater levels of provisioning by banks will combine to depress earnings’ growth levels in 2009.
“We expect that earnings decline, hitherto unprecedented in the Nigerian market, even on a quarterly basis would become less infrequent, going into the next 12 months as the earnings impact of this tripod of pressures kick in. What remains unclear is the extent to which banks will remain sufficiently well positioned to profit from underlying opportunities that continue to be thrown up across the market, many on account of market difficulties,” Afrinvest added.
(Source:BusinessDay)

NDIC hands over Savannah Bank to owners

Nigerian Deposit Insurance Corporation (NDIC), yesterday in Lagos, formally handed over Savannah Bank, which had been closed for seven years, to its owners. Also, the new core investors, in Wema Bank, SW8 Consortium, have completed arrangements to take over the management of the bank today.

Speaking at the historic event, the NDIC’s Managing Director and Chief Executive, Alhaji Ganiyu Ogunleye, said the hand over was in line with an Abuja appeal court ruling and the first major step to regain possession of the bank, assuring the owners of maximum support in their efforts to reopen shops for business.

Ogunleye, who traced the genesis of the crisis and why the regulators, Central Bank of Nigeria (CBN) and NDIC, revoked its license and liquidated the bank, noted that they were only able to close 59 of the 104 branches across the country.

The NDIC boss said that since the decision of the court that the revocation of the license was not in compliance with the provision of the law, police had secured the premises of the bank

Why Savannah Bank can’t open to public now, - CBN

Why Savannah Bank can’t open to public now, by CBN

This is an epoch making event. There are so many steps before the bank can open to the public. Other issues, which are confidential and cannot be made public here, will have to be addressed before the bank can open to the public.”

With the above statement, the Central Bank of Nigeria (CBN), Tuesday, removed the lid on the embattled Savannah Bank which was closed about 88 months ago. The licence of the bank was withdrawn for insolvency rated issues in February 2002, but the Court of Appeal upheld an earlier judgement by a High Court and consequently restored the bank’s licence, last February.

Consequently, the owners of the bank led by Jim Nwobodo were ordered by the court to meet the N25 billion minimum capital requirements for doing banking business in Nigeria within 18 months. This is expected to lapse on July 31, 2010.

Shola Awoyungbe, who represented CBN at the official handover of the bank by the Nigeria Deposit Insurance Corporation (NDIC) to the owners, said that the apex bank was in agreement with the position of the NDIC that the action was in compliance with the judgement of the court

STOCKMARKET:STAKEHOLDERS HOPEFUL OF SUSTAINABILITY OF MARKET REBOUND

When the indices of corporate performance on the Nigerian stock Exchange (The All Share Index and market capitalisation which measures the movement of share prices), began an upward movement mid last month, investors heaved a sigh of relief, having experienced a long period of the dominance of the bears, which lasted for about 12 months.To some investors, who had waited for months for the stock market to rebound, it was good news as part of the monies perceived to be lost in the stock meltdown came back somehow.Indeed, the ASI has gained 24.1 per cent in the past month, while the make capitalisation rose in tandem.Signs of a market rebound became manifest mid last month when at the close of business on April 17, 2009, the All-Share Index which measure the movement of share prices rose by 0.35 per cent to close at 19,983.09 points, while market capitalisation closed slightly higher at N4.52tn, and the NSE- 30 index rose by 1.2 per cent to close at 655.39 points.The trend continued in the week ended April 24, 2009 when the ASI rose by 7.4 per cent to close at 2,455.92 points, with market capitalisation closing at 21,455.92 points while market capitalisation of the 200 First - tier equities closed higher at N4.87tn, and the NSE- 30 index rose by 8.9 per cent to close at 713.49 points.By the week ended April 30, the index rose by 0.16 per cent to close at 21.491.11 points, while market capitalisation closed higher at N4.88tn.The week ended May 8, 2009 brought more succour to investors as the index rose by 9.42 per cent to close at 23,516.26 points, while market capitalisation rose further to close at N5.34tn, and the NSE-30 index rose by 12.2 per cent to close at 815.08 points.It was another bullish week ended May 15 as the ASI rose by 5.44 per cent to close last Friday at 24,796.42 points, while market capitalization closed higher at N5.63tn, and the NSE - 30 index rose by 2.7 per cent to close at 837.31 points.Also last month, a review of the stock market showed that investors are renewing interest in stocks as the Nigerian stock market witnessed improvement in the level of activities. For instance, for the third consecutive month, turnover volume and value rose in April to 7.96 billion shares valued at N42.4bn in 121,940 deals, up from 7.8 billion shares traded in 131,419 deals in March.Discerning investors are, however, concerned about the sustainability of the performance of the market currently.Investigation showed that the sustainability of the bull run was hinged on several factors which included positive signals from the government, especially on its pronouncement about the markets; its macro economic policies; investors‘ willingness to take profit from capital appreciation, and sustenance of the renewed confidence of investors, which stockbrokers said is even more important than liquidity in the market.For instance, while stating that the corporate returns on investment and good results posted by quoted companies was partly responsible for the bullish trend currently being experienced, the Assistant General Manager of the Nigerian stock Exchange, Mr. Sola Oni said: “The sustainability of the current trend would be determined by many factors, which include conclusive operating climate for listed companies post listing requirements, and investors readiness to appreciate that the capital market is not for short term.”Still on the sustainability of the trend, a senior stockbroker, Mr. Emmanuel Ohanwusi of Vision Trust Securities, said, “It will be sustained for sometime because investors have suffered major losses. As far as people do not panic. It is confidence we need and not really liquidity.“Government should also desist from making political statements that tend to undermine the growth of the markets. If it does not have an answer to any problem, they should give the impression that they are looking into it, rather than saying it is not a problem or that they will not attend to it.The immediate past President of the Chartered Institute of Stockbrokers, Mr. Oladipo Aina, however, posited that the bullish trend may not be sustainable in the short run as panic selling by some investors is still expected. He however, noted that the market was on the path of quick recovery, and this had come even earlier than what some experts predicted earlier.He said, “The activities of the last few weeks have been encouraging, and it is an indication that for investors, confidence is returning to the market. However, we have to be a bit vigilant, because we expert some people may want to take profit.That will happen for sometime because people have been bruised in the past. We expert panic selling for a while, but overall, we are happy that activity is returning to the market. I personally believe that the market will recover faster than I earlier predicted. I had predicated 18 months, but certainly it is going to be earlier. It is not that we have more liquidity now than before, but confidence is gradually returning.Oni and Aina also said that the recent intervention of regulators with the banks as regards the margin facilities granted stock broking firms, which has given a reprieve to the stock broking firms and banks was also responsible for lifting the market.Another factor is the good corporate results released by quoted companies and proposed dividend and bonus issues which is eliciting investors, interest in their stocks.For instance, in the financial year ended December 31, 2008, Guaranty Trust Bank Plc posted an after tax profit of N28.3bn, up from N21.2bn in 2007. The board has proposed a dividend of N1 per share and a bonus of one for four.Mobil Oil Nigeria also recorded a profit of N1.719bn in 2008 over N1.31bn in 2007, and its board of directors have recommended N5 dividend per share.Zenith Bank Plc has also disclosed its intention to give an intention bonus of one for every two existing shares, on its first quarter result ended March 31, 2009.By the results, the bank‘s gross, earnings rose from N91.5bn in the same period in 2008 to N109.7bn in the review period and an after tax profit which rose from N16.9bn to N20.3bn.These results among others, according to stockbrokers and the Nigerian Stock Exchange was largely responsible for the bullish trends as it reinforces the impression that the fundamentals of the quoted companies are strong.On why the bulls staged a come back, Oni said; ”The current trend in the last four weeks has confirmed our belief that our market is resilient and its fundamentals remain strong.Investors are currently experiencing impressive corporate earnings as typified by robust dividend payment and generous bonuses by listed companies. This trend is fast eliciting demand for the companies‘ shares as investors want to take advantage of those returns.”The Exchange as an organization has also continued to improve on the quality of listed companies reporting style. For instance, the Exchange has fully enforced the need for listed companies to make forecast as a way of enabling both existing and potential investors to understand the companies, and encouraged foreign investors including hedge funds which seldom trade their stocks to invest.”For Aina, market rebound is an indication that investors are showing more interest in the market.He said. ”The market has corrected itself up to a point. Last year, at the peak of the market many companies had double or triple digit price earnings ratios, which indicates the number of years it would take for investors to recoup their investment, but if you look at it from the beginning of this year, some have dropped to single digits. As at March last year most of them were double digits.”Generally, people convinced that the market was good enough for them to return to, so that they will have good bargain. The results of companies coming to the market recently have also been quite encouraging.”We were also told that some banks would restructure their margin loans. So we expect that banks will free some credit when the loans are restructured.
”Source:The Punch NewspaperMonday, May 18, 2009