Liquidity mop up in a challenged economy

The four-month old monetary policy easing (expansionary) programme of the Central Bank of Nigeria (CBN) was unexpectedly cut short in March as the benchmark interest rate, also known as the Monetary Policy Rate (MPR) was reversed to 12 per cent after the November 2015 reduction to 11 per cent from 13 per cent.

The Monetary Policy Committee of CBN also raised the cash reserve ratio (CRR) for commercial banks to 22.5 per cent from 20 per cent, after reducing it by five per cent the same period from 25 per cent, and held bank’s liquidity ratio at 30 per cent.

The decisions simply meant that the quantity of money in circulation is effectively reduced, together with liquidity in banks’ possession and consequently, credit expansion ability of banks reduced. It also signaled the beginning of a period of focused attention on the quantity of money in circulation and how it affects the entire economy.

On the other hand, the upward adjustments of the MPR by one per cent would serve as compensation to investors for lowered real returns occasioned by inflation, as well as attract foreign private capital into the country. But financial market operators responded almost immediately, saying the adjustment was not enough to attract the anticipated investments.

For emphasis, the committee had in November 2015, lowered the MPR to 11 per cent from 13 per cent; reduced CRR from 25 per cent to 20 per cent; cut its Standing Deposit Rate for banks to four per cent (now seven per cent); and pegged its Standing Lending Rate for banks at 13 per cent (now 14 per cent), all in efforts to make more naira available for lending then.

Of course, just as before the last MPC meeting in March, the monetary authority has not let down the guard in wielding and tweaking its instruments towards impacting on liquidity level for desired direction and control level.

This is where the term “mop-up”, which upsets some analysts, comes in. The word mop-up is a term used to describe CBN’s deliberate action to regulate the quantity of money in circulation, using monetary policy instruments like treasury bill, bond auction, interest rate, among others, to achieve it.

Since the last decision of the policy makers, the monetary authority has been at it with regular exercise of treasury bills auction, redemption of matured ones, as well as rollover of matured instruments, together with bond.

For one thing, it brings about price stability, while checkmating inflation trend and curtails the excessive naira balance in the system that aids arbitrage in the foreign exchange market.

In fact, the CBN Governor, Godwin Emefiele, said part of the MPC’s considerations in the far-reaching rate decisions was the persistent fall in the naira exchange rate, which partly was attributed to excess liquidity and the latest report on inflation that hit 11.4 per cent (now 12.8 per cent).

CBN had earlier this year, said it would from January to March 3, auction its 364-day paper bills, worth N735.54 billion, which is part of its regular liquidity mop-up exercise.

Still, a new schedule of planned debt deals by the Federal Government in the second quarter of the year, showed that it may raise between N274b and N365b to tackle the current fiscal challenges.

Meanwhile, the Debt Management Office has kicked off its second quarter borrowing, as it raised N170b in bonds, made up of N40b paper maturing in 2036; N40b maturing in 2026; and N20b maturing in 2020 using the Dutch Auction System, but added N70b to the 2026 bonds in a non-competitive tender.

Again, CBN raised N167.51b through treasury bills last week, with varying maturities ranging from three months one year- N36.78b in the three-month category; N35b in the six-month paper; and N95.73b from the one year debt instrument.

These debt plans are also part of strategies to mop-up excess liquidity in circulation to curb rising inflation and finance the 2016 budget deficit, as well as help commercial lenders manage their liquidity.

Emefiele noted that the average inter-bank call and Open Buy-Back rates between January 25th and end of February 2016, stood at 1.43 per cent and 2.68 per cent, an indication of liquidity surfeit in the banking system.

Again, he said the new rate regime forms part of strategies to address the supply constraint in the foreign exchange market, as yields on domestic instruments have to be competitive to attract the much-needed foreign exchange inflows.

In less than a week after the rate decision, no less than N409.7b were withdrawn from circulation, with the inter-bank lending rates rising to 20 per cent, as banks, in an effort to meet the obligation for the new CRR requirement, scrambled for available cash in the money market, thereby causing a spike in the Open Buy-Back (OBB) and Overnight rates to 20 per cent against the then subsisting 6.75 per cent and 7.33 per cent.

However, analysts said that the decision to move up CRR by 2.5 per cent to 22.5 per cent, after it was earlier reduced from 25 per cent to 20 per cent four months ago, showed that the operating environment has remained unattractive for loan growth.

The Head of Investment Research at Afrinvest Securities Limited, Ayodeji Eboh, said the increased rate has worsened matters relating to structural factors, pushing costs up as price of funds rise.

He also faulted the suggestion that increase in banking system liquidity is fundamentally driving the pressure on exchange rate, as high subscription at CBN interbank auctions continued, despite intermittent treasury bills issuance conducted.

The Associate Research at Eczellon Capital Limited, Mustapha Suberu, had earlier predicted that with the action of the MPC, there is going to be an increase in money market rates on the back of the squeeze in banking system liquidity, which would translate to a higher cost of funds for financial institutions, as well as their customers, and further pressure their net interest margin.

The succor the economy is likely to witness in the short term, he said, would be stability in the value of the naira, especially at the parallel market, as reduced naira liquidity would likely cushion demand for the dollar.

“It is obvious that money market rates have risen sharply post-MPC meeting. The moderation that was witnessed at the end of March and so far in April could be tied to increased liquidity in the market through maturing treasury instruments, coupled with a slowdown in Open Market Operation auctions by the Central Bank of Nigeria. In all, the average money market rate is higher post-MPC, compared to periods before March 22.

“The Naira has also remained relatively stable post-MPC compared to earlier trading days in March. The value of the currency has oscillated between N322/$ and N324/$ (currently N310 with the mix of Nigeria-China currency deal), compared to the N385/$ earlier in March.

The President and Chief Executive Officer of Time Economics Limited, Dr. Ogho Okiti, on the other hand, said the decision expectedly, had positive implications for portfolio flows and re-pricing of yields in the bonds market through the weeks.

“The committee’s decision to narrow the asymmetric MPR corridor is geared towards encouraging banks to deposit excess funds with the CBN. Following the MPC decisions to reign on excess liquidity in the banking system by increasing the asymmetric corridor to +200/-500 basis points from +200/-700 basis points, CBN’s net Standing Deposit Facility effectively witnessed an upsurge of funds from N84.2b recorded four days before the decision to N106b two days after the decision,” he said.

The N21.8b increase in deposits at CBN by banks, representing 25.8 per cent sharp response to the seven per cent interest rate offered to banks to reduce their liquidity position also showed financial institutions’ preference for risk free investment to private sector lendings, which has been long labelled “risky.”

Also, on the decision to increase the benchmark interest rate, he noted that bond yields towards the end of March spiked across the curve, as yields on benchmark 20-year bonds increased by 55 basis points (bps), to 12.7 per cent; while yields on 10-year bonds increased by 45 bps, to 12.65 per cent.

“The 5-year paper bond yield –with the most liquid maturity– rose by 41 bps, to 11.7 per cent. Bond yields on 1-year treasury bills and 91-days treasury bills increased to 9.56 per cent and 6.10 per cent March 2015

“So effectively, the MPC decisions of last month has so far relatively produced desired outcome in terms of repricing of yields in the bonds markets and increasing commercial banks’ deposit with the CBN”, he said, as well as reducing the quantity of money in circulation.

Emefiele, though acceded to the fact that the quantity of the naira in circulation needed “trimming”, given the inflationary trend then, but also affirmed that “the rising inflationary pressure was traced to the lingering scarcity of refined petroleum products, exchange rate pass through from imported goods, seasonal factors and increase in electricity tariff.”

But true to his word, the latest report of the National Bureau of Statistics (NBS), barely three weeks after the decision, noted that the trickling effects of the lingering foreign exchange crisis and scarcity of the Premium Motor Spirit, as well as the adjustment in the electricity tariffs nationwide drove food prices up, resulting to a new record of inflation near four-year high of 12.8 per cent.

Besides, the inflation’s trend has been marked by over 100 basis points increase for two consecutive months of February and March, but has notably defied the liquidity mop ups of the apex bank, an indication that the inflation is not demand driven, but cost push.

“The higher price level was reflected in faster increases across all divisions. Transportation costs, the planting season, and foreign exchange movements created significant upward pressures on the Food index in March.

“The Food index increased by 12.7 per cent, up by 1.4 per cent points from rates recorded in February as all major food groups, which contribute to the food sub-index increased at a faster pace.

“Imported items, as well as, other domestic shocks continued to have ripple effects across many divisions that contribute to the Core Index. The index increased by 12.2 per cent in March, roughly 1.1 per cent points from rates recorded in February.

“The Food sub-index continues to record upward pressure from both imported foods, as well as, cereals. In March, the Food index increased by 12.7 per cent year-on-year), 1.4 per cent points higher from rates recorded in February and reaching a year-on-year high last recorded in May 2012.

“The highest price increases were recorded in the fish, vegetables, and bread and cereals groups for the third consecutive month. On a month-on- month basis, the Food sub-index increased by 2.3 per cent in March, 0.9 per cent points higher from rates recorded in February,” NBS said.

Source: Guardian Newspaper.

Wall Street falls as earnings weigh; Dow, S&P up for month

U.S. stocks posted their largest weekly drop in more than two months on Friday as earnings reports continued to weigh, but the S&P 500 and Dow managed to close up for April after strong showings mid-month.

Company results once more gave the market direction as a 9 percent decline in Gilead Sciences shares weighed the most on both the S&P and the Nasdaq Composite.

Apple shares were down for the tenth session in the last 11 and closed the week down 11.3 percent, the largest such decline since January 2013. Its April fall was of 14 percent.

Apple and Gilead, alongside Corning, Goodyear and Xerox are among the companies that reported earnings this week and are closing them with double-digit declines in their stock.

"Every sort of case-by-case blowup was handled in a company-specific fashion and lo and behold this week we have stumbled into some household names that kind of rolled the market over with them," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

The Dow Jones industrial average fell 57.12 points, or 0.32 percent, to 17,773.64, the S&P 500 lost 10.51 points, or 0.51 percent, to 2,065.3 and the Nasdaq Composite dropped 29.93 points, or 0.62 percent, to 4,775.36.

The weekly declines were of 1.3 percent for both the Dow and S&P and the Nasdaq fell 2.7 percent. It was the largest weekly drop for the Dow since the week to Feb. 12, and for the S&P and Nasdaq the declines were the largest going back to Feb. 5.

For the month, only the Nasdaq ended in negative territory.

"Today's fall is just noise after the massive movement we've seen in the past few weeks," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

Materials stocks on the S&P 500 fell 0.6 percent Friday, taking the index down 0.3 percent for the week. However its April gain of 4.9 percent adds to advances in February and March that make the three-month increase of more than 20 percent the largest for the sector in any three consecutive months going back to September 2009.

On Friday Amazon jumped 9.6 percent to $659.59 after the company's quarterly results blew past analysts' expectations.

First-quarter earnings from S&P 500 components are expected to have fallen 5.7 percent from a year earlier, according to Thomson Reuters I/B/E/S. Of the 311 companies that have reported, 57 percent reported revenue above analyst expectations, compared with the long-term average of 60 percent.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 1.36-to-1 and on the Nasdaq a 1.81-to-1 ratio favored decliners.

The S&P 500 posted four new 52-week highs and three new lows; the Nasdaq recorded 42 new highs and 32 new lows.

Volume on U.S. exchanges totaled just above 9 billion shares, compared with the 7.0 billion average over the past 20 sessions.

Source: www.reuters.com

Oil prices reach 2016 highs

World oil prices struck 2016 high points this week as a weaker dollar attracted buyers to a market struggling to overcome a global supply glut.

Dollar-denominated oil has become more attractive for buyers of rival currencies despite lingering concerns about excess output, thanks to the US unit falling heavily, particularly against the yen.

The dollar’s fall comes as the US Federal Reserve held interest rates unchanged at its policy meeting on Wednesday, signalling it was in no hurry to raise borrowing costs.

The dollar has since fallen sharply against the yen after the Bank of Japan decided against additional stimulus measures for the struggling Japanese economy.

On Friday, the Brent oil contract reached $48.50 a barrel — the highest level since early November.

US benchmark West Texas Intermediate (WTI) hit a near six-month peak at $46.63.

Brent is meanwhile on course for its best monthly gain since May 2009, noted David Cheetham, analyst at trading firm XTB, on the final trading day of April.

“The 22 percent rise so far in April has seen the market move back above the $48 handle for the first time since early November,” he added.

Around 1300 GMT, Brent North Sea crude for delivery in June was slightly off Friday’s high, though still up nine cents compared with Thursday’s close, at $48.23 a barrel.

WTI for June stood at $46.49, up 46 cents.

“Nothing appears capable of stopping the surge in oil prices at the moment,” Commerzbank analyst Carsten Fritsch said this week.

“Attention is paid to any news that fits in with the general picture of rising prices, whereas any news that does not is largely ignored,” he added.

Oil prices has won support in recent days also from speculation that Saudi Arabia is planning to cut back drilling as the market worries about excessive global supplies.

The market “seems to have got an extra boost from a report out of Nabor Industries’ earnings call”, said Bob Yawger of Mizuho Securities.

Yawger said the drilling company claimed that the Saudis have plans to reduce their rig counts by 10 percent.

Earlier this month, major crude producers, including OPEC kingpin Saudi Arabia, failed to agree in Doha to curbing crude output.

Oil prices meanwhile endured brief pressure midweek after the US Energy Department reported that commercial crude stockpiles in the United States jumped by two million barrels last week, slightly more than analysts had expected.

The oil market is recovering after nosediving to 13-year lows of around $27 in February, in the wake of a sustained drop from above around $100 seen two years ago.

Source: Guardian Newspaper.

U.S. banks' dismal first quarter may spell trouble for 2016

It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks.

Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week.

Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth.

Analysts forecast a 20 percent decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs Group Inc (GS.N), are expected to report the worst results in over ten years.

This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year.

"What's concerning people is they're saying, 'Is this going to spill over into other quarters?'" Goldman's lead banking analyst Richard Ramsden said in an interview. "If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium."

Investors will get some insight on Wednesday, when earnings season kicks off with JPMorgan Chase & Co (JPM.N), the country's largest bank. That will be followed by Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N) on Thursday, Citigroup Inc (C.N) on Friday, and Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N) on Monday and Tuesday, respectively, in the following week.

Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially.

The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business.

Bank executives have already warned investors to expect major declines across other areas as well.

Citigroup Inc (C.N) CFO John Gerspach said to expect trading revenue more broadly to drop 15 percent versus the first quarter of last year. JPMorgan Chase & Co's (JPM.N) Daniel Pinto said to expect a 25 percent decline in investment banking. Several bank executives have warned about declining quality of energy sector loans.

Global investment banking fees for completed merger and acquisitions, and stock and bond underwriting, totaled $15.6 billion in the first quarter, a 28 percent decline for the year-ago period, according to Thomson Reuters data.

Volatility in stock prices and plunging commodities prices caused trading volume to dry up during most of the quarter. Trading activity picked up slightly in March but was not strong enough to offset declines during the first two months of the year.

Analysts have been lowering first-quarter estimates over the last month in light of business pressures. They now expect JPMorgan to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis.

Matt Burnell, a Wells Fargo banking analyst, said in a research note Friday that capital markets weakness may extend at least into the second quarter.

Analysts said there may be some loan growth outside of the energy sector, and a small uptick in net interest margins, a measure of loan profitability, but overall, the tone was less-than-optimistic.

"The first quarter is going to be ugly and we don't think that necessarily gets recovered in the back half of the year," said Jerry Braakman, chief investment officer of First American Trust, which owns shares of Citigroup, JPMorgan, Wells Fargo and Goldman. "There are a lot of challenges ahead."

Source: www.reuters.com

Asia shares, dollar start week on the back foot

Asian stocks wobbled on Monday and Japan's Nikkei index slid as the dollar notched a fresh 17-month low against the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased earlier losses and edged up about 0.1 percent, after Wall Street ended with modest gains on Friday even as the S&P 500 .SPX still suffered its biggest weekly decline in two months.

Japan's Nikkei stock index .N225 tumbled 1.3 percent. In addition to a stronger currency, data released early on Monday showed Japan's core machinery orders fell 9.2 percent in February from the previous month, in a sign that business investment remains subdued.

"While February's machinery orders fell less than anticipated, Japan markets remain weighed down by a strengthening yen and uncertainty surrounding when, or if, the Bank of Japan will intervene," said Andrew Meredith, co-managing director at Tyton Capital Advisors.

Data out on Monday showed China's consumer price inflation was less than expected in March, while wholesale prices declined less than anticipated, in a sign that deflationary pressure in the industrial sector may be easing.

While the figures pointed to stabilizing prices, they also underscored that the central bank's prolonged easing campaign begun in late 2014 has yet to result in substantial price increases.

Chinese shares were higher in early trading, with the blue-chip CSI300 index .CSI300 up 1.8 percent, while the Shanghai Composite Index .SSEC added 1.9 percent.

The greenback's recent slide against the yen prompted a chorus of warnings from officials in Tokyo and put investors on alert for direct yen-selling intervention, though many believed Japan would stay its invention hand.

Japan's top government spokesman, Chief Cabinet Secretary Yoshihide Suga, said on Monday that recent currency moves were one-sided and speculative and that the government would take steps as needed.

The dollar wallowed close to lows notched last week, as investors mulled the outlook for U.S. monetary policy, with the Federal Reserve seen as being more cautious on hiking interest rates than some investors had believed.

The dollar index, which tracks the U.S. unit against a basket of six major currencies, fell 0.2 percent to 94.094 .DXY, within sight of last week's low of 94.015, which was its lowest since October.

The euro EUR= was up about 0.1 percent at $1.1412, not far from last week's high of $1.1454, its highest since October.

The dollar slipped 0.2 percent to 107.91 yen JPY= after earlier nudging down to 107.63, which was its weakest since October 2014.

Crude oil prices pared earlier gains but were still higher after soaring more than 6 percent on Friday. They also marked gains of about 8 percent for the week, as drawdowns in U.S. crude stockpiles fed hopes that the end was in sight for the global supply glut that has plagued the industry for nearly two years.

U.S. crude futures added 0.4 percent to $39.87 a barrel after jumping 6.6 percent on Friday, while Brent crude LCOc1 was also up about 0.4 percent at $42.12, after settling up 6.4 percent.

The weaker dollar and stock market losses helped lift spot gold to its highest in nearly three weeks. Gold XAU= rose to $1,251.70 an ounce, its highest since March 22. It was last up about 0.9 percent at $1,251.00

Source: www.reuters.com

Interbank rates fall amid N519b NDIC premium, CRR debits, forex provisions

For the second week in a row, the interbank lending rates failed to rise even as the liquidity level in the financial system was depleted significantly towards the end of the week’s activities, from about N518.8 billion to N405 billion.

The cash withdrawals effected through premium payments to the Nigerian Deposit Insurance Corporation (NDIC); Cash Reserve Requirements (CRR) debits and foreign exchange auction provisions by bank left the Open Buy-Back and Overnight rates lower than previous week at 3.1 per cent and 3.6 per cent respectively.

A trader said that the level of liquidity now is sufficient to support transactions at the money market, leading to moderation of borrowing costs among banks, defying rate influencing factors.

Already, there are projections that the mood in the market will subsist this week, as treasury bills worth N91 billion will be due for redemption, while unfulfilled cash deposits made for forex auction by banks will return to the system.

The OBB and Overnight rates had opened last week at 3.8 per cent and 4.3 per cent due to robust system liquidity and later rose by 2.5 per cent and 2.3 per cent to settle at 6.3 per cent and 6.6 per cent respectively as the CBN mopped up about N40.3 billion from the system.

The rates however moderated to 3.8 per cent and 4.4 per cent in the middle of the week as inflows from unfulfilled foreign exchange provisioning refunds by CBN to banks for the previous week hit the system.

Consequently, market liquidity stood at N923.8 mid-week, but reduced to about N405 billion as market opened on Thursday and subsequently, closed the week down at 0.7 per cent week-on-week respectively.

Meanwhile the foreign exchange market continues to remain relatively stable week-on-week, although the spread between the official/interbank and the BDC/parallel market rates remains staggering.

While the Naira/Dollar exchange rate at the CBN and interbank remained at N197/$ and N199.50/$, at the BDC segment, it traded at N320/$ on all trading days of the week, with the parallel market rate pegged at N322/$ on all trading days, except Tuesday when it declined marginally to N323/$.

Relatedly, the treasury bills market was broadly bullish last week as average rate declined on most trading days.

Specifically, average bill eased 0.6 per cent from the previous trading session to close at eight per cent at the beginning of the week, declined further by 0.1 per cent to 7.9 per cent on Tuesday, as activities on short termed instruments increased.

In the middle of the week, CBN auctioned treasury bill worth N218.9 billion, allotting N19 billion for 91-day; N33.5 billion, 182-day; and N166.4 billion for 364-day, at stop rates of 6.1 per cent, 8.7 per cent and 9.5 per cent respectively.

With interests focused majorly in the 364-day bills, it was oversubscribed by about 175.4 per cent, compared with the 91-day bill that was undersubscribed by 54.5 per cent.

Source: Guardian Newspaper.

Stock index provider to delist Nigeria as forex crisis lingers

• Govt laments $2.8b capital flight over importation of ICT wares

• Customs probes discharge of oil, gas cargoes at terminals

Stakeholders in the financial market have expressed worry about the poor handling of sensitive issues in the economy by government, particularly with regard to the lingering fuel scarcity and foreign exchange needed to import the commodity.

The implications, besides the foreign exchange-related pressure on the economy so far, are the aggregate value of man-hours lost at the fuel stations and the attendant high cost of basic needs.

Meanwhile, the stock index provider, MSCI World, is currently seeking feedback from investors on the ease of access to the Nigerian equity market, in a move that could finally lead to the exclusion of the nation’s bourse from MSCI’s Frontier Markets index.

The MSCI World is a stock market index of 1,631 ‘world’ stocks maintained by MSCI Inc. and used as a common benchmark for ‘world’ or ‘global’ stock funds that attract investors.

Besides, the Federal Government has expressed worry about the increasing apathy towards locally made Information and Communications Technology (ICT) products, especially the hardware. The government said it had discovered that Nigeria loses about $2.8 billion to the importation of hardware yearly.

In the same vein, following persistent protest from some facilitators of Free Trade Zones (FTZs) against alleged ‘ monopoly’ in the Nigerian oil and gas logistic supply services, the Nigeria Customs Service (NCS) has announced plans to carry out an investigation.

The continuous delay in the implementation of the 2016 budget and the dark cloud around the possibility of implementing the figures due to poor earnings’ profile of government are also critical challenges that the economy and the administration stand to battle with.

Analysts at Afrinvest Securities Limited told The Guardian at the weekend, however, that to pull the system out of the current economic challenges, the time had come for the administration to review its approach to solving the lingering energy crisis in the country, together with its foreign exchange component.

In a statement issued last week by MSCI World, according to Reuters, the consultation followed the introduction of restrictions on foreign currency trading, saying that it would make public its decision on or before April 29.

With Nigeria in the throes of severe economic crisis due to the falling crude oil price, which reduced foreign exchange earnings, the apex bank decided to peg the currency and introduce curbs to protect reserves that are now at 11-year low at $27.67 billion.

The restrictions have been a long-drawn battle between the financial system regulator and the local/foreign portfolio investors, with JPMorgan delisting the country from its Government Bond Index-Emerging Markets.

MSCI said that the ease of capital inflows and outflows was one of the key criteria in its market classification framework- foreign exchange, which specifically appears to be the major issue cited by JPMorgan.

“Introduction of restrictive measures, such as capital or foreign exchange controls, which can lead to material deterioration of equity market accessibility, may result in the exclusion of such market from the MSCI Frontier Markets Indexes and a reclassification to Standalone Market status,” it warned.

The Global Chief Economist at Renaissance Capital, Charles Robertson, said the possibility that Nigeria might lose its place in the index had been a risk since it was excluded from key bond indices by JPMorgan and Barclays last year.

“Now the risk has become acute. Being excluded would create a higher hurdle to attracting future investments, as there would be no need for passive frontier market funds, which track the MSCI index, to hold Nigerian stocks.”

However, the Head of Investment Research at Afrinvest, Ayodeji Eboh, said: “Deregulating the downstream oil and gas sector remains the most efficient option. The protracted challenges in the currency market require more creative solutions as the ongoing fuel scarcity cannot be isolated from the difficulty in providing foreign exchange for the importation of petrol to meet domestic demand.

“Apart from the continuous delay in the 2016 budget implementation, the government is yet to communicate a well-articulated economic plan to drive market expectation and stabilise the system. A plethora of progressive and reflationary monetary and fiscal policies need to be put in place.”

At the end of his tour of FTZs in Lagos, Comptroller General of Customs, Col. Hameed Alli (rtd), said the plan to investigate the alleged monopoly in Nigerian oil and gas logistic supply services was in line with the Federal Government’s resolve to promote fairness and transparency in the sector.

According to the customs boss, the alleged monopoly in an FTZ and its legal status are to be investigated and a decision taken at the end of the exercise.

He said: “President Muhammadu Buhari stands for fairness and transparency. The idea of change is to do business in the right frame of work. We will go back and look at the law that exists. If we find any act of injustice, we will address it.”

The chairman of Jagal Group, owners of Nigerdock, Anwar Jarmakani had during Ali’s visit to Snake Island Integrated Free Zone (SIIFZ) recently said Nigeria was losing between $3 and $5 on every barrel of oil produced, which according to him translates to $1.5 billion yearly to non-existent laws, which purportedly encourages monopoly in oil and gas logistics in the country

Jarmakani, who is the chairman of SIIFZ, explained that monopoly had destroyed Nigeria’s reputation in oil and gas logistics. According to him, dominant monopoly in Nigeria’s oil and gas, as well as supply services had existed for over 20 years “sabotaging the national economy, conspiring and working against any potential competitors, particularly against Snake Island Integrated Free Zone.”

Jarmakani added: “The monopoly has consistently used this non-existent law to coerce the industry and service providers into doing their bidding and thereby undermining the Nigerian economy. If this law indeed exists, the Federal Government of Nigeria would not have encouraged other critical players like SIIFZ to make a huge investment in this industry.”

The Minister of Communications, Adebayo Shittu who disclosed the huge capital flight in Lagos, at the weekend, at an event organised by the Association of Telecommunications Companies of Nigeria (ATCON) in his honour said the government looked to leverage the communication technology sector to solve the problem of unemployment in the country because the revenue from the oil and gas sector had been on a steady decline since early 2015. He noted: “Therefore every avenue that is bringing losses to the country must be blocked completely.”

Shittu who said government targets the creation of two million jobs in the next six months charged ATCON to come up with how best the sector could be useful in the current skill gap, stressing that he believed the country had the enabling environment and laws needed to foster the required growth.

Indeed, findings by The Guardian yesterday, revealed that on a monthly basis, about four million mobile phone units are imported into Nigeria.

An industry source, who preferred anonymity told The Guardian that in 2014 alone, about 24 million units of mobile phones were shipped into the country with smartphones accounting for 20 per cent.

Commenting on local content development, Shittu said he had observed that one of the major challenges to growing Nigeria’s ICT sector had largely been apathy towards indigenous products and services.

“Reports reaching me show that the country is losing about $2.8 billion yearly to the continued importation of ICT hardware and services as capital flights from the country.

“We would like to see international brands establish factories in Nigeria or partner any local operators or buy components of their systems that are produced by local manufacturers as well as maintaining in-country research and development departments for the purpose of product conceptualisation, innovation, adaptation and design development.

“The local content development policy would be implemented to protect indigenous players in the industry and the ministry would galvanise the right policies that would see to the need of Small and Medium scale Enterprises (SMEs),” he stressed.

Source: Guardian Newspaper.

Egypt, Saudi Arabia sign 60 billion Saudi riyal investment fund pact

Egypt and Saudi Arabia signed an agreement late on Saturday to set up a 60 billion Saudi riyal investment fund among other investment agreements including an economic free-zone to develop Egypt's Sinai region, Egyptian state television reported.

The signing of the agreements took place in Egypt's Abdeen palace in the presence of Egypt's President Abdel Fattah al-Sisi and Saudi's King Salman, during a rare 4-day visit to Egypt.

Egypt has struggled to spur economic growth since the 2011 uprising ushered in political instability that scared off tourists and foreign investors, key sources of foreign currency.

Egyptian state TV said the agreement was to establish "a Saudi-Egyptian investment fund with a capital of 60 billion riyals between the Saudi Public Investment Fund and the entities belonging to it and the Egyptian government and the entities that belong to it."

A memorandum of understanding was also signed between the Saudi Public Investment Fund and the Egyptian International Cooperation Ministry to set up an economic free-zone in Sinai. No other details were announced.

The two countries also signed agreements to develop a 2250 Megawatt electricity plant with a cost of $2.2 billion, set up agriculture complexes in Sinai and develop a canal to transfer water, a statement from the Presidency said.

The statement also said that a company was set up to develop 6 square kilometers of the industrial zone around Egypt's Suez Canal worth $3.3 billion, without giving further details.

The investments are part of a change in strategy from Saudi Arabia to focus more on financial support that will also benefit Saudi Arabia with return on investment.

Saudi Arabia, along with other Gulf oil producers, has pumped billions of dollars, including grants, into Egypt's flagging economy since the army toppled President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule.

Some of the projects announced on Saturday include private sector investments. Last week the deputy head of the Saudi-Egyptian Business Council told Reuters that Saudi businessmen are investing around $4 billion in projects in Egypt and have already deposited 10 percent of that sum in Egyptian banks.

Egypt is aiming for direct foreign investment of around $8-$10 billion in 2015/16.

On Friday, King Salman announced that a bridge connecting Egypt and Saudi Arabia would be built across the Red Sea. No details were given.

Egypt also signed development agreements with Saudi Arabia worth $590 million, Egyptian International Cooperation Minister Sahar Nasr said on Friday.

She said the agreements, signed with the Saudi finance minister, covered development in the Sinai peninsula, agriculture, housing and a university.

The agreements also include a memorandum of understanding between Saudi Aramco and Egypt's Arab Petroleum Pipelines Company SUMED.

Source:www.reuters.com

Wall St. slides amid global economic worries

U.S. stocks dropped Thursday as oil prices slid and worries about the global economy resurfaced, putting pressure on the dollar as investors fled riskier assets.

The Dow Jones industrial average .DJI fell 173.95 points, or 0.98 percent, to 17,542.1, the S&P 500 .SPX lost 24.7 points, or 1.2 percent, to 2,041.96 and the Nasdaq Composite .IXIC dropped 72.35 points, or 1.47 percent, to 4,848.37.

Source: www.reuters.com

The Pros and Cons of DIY Website vs. Professionally Developed

If you’re looking into building a new website or updating an existing site, one of the first choices you’ll have to make is whether to do it yourself or hire a professional. Not so long ago, there would have been no question of hiring a pro to get the results you want, but thanks to the rise of online tools like website builders, it has become much easier for the non-techies among us to build a more-than-decent website. Just because you can, though, doesn’t always mean you should. It’s a decision that’s worth weighing carefully, since for some projects a professional cannot be replaced by a tool.

Here are some considerations that might help you decide.

Popular Website Options.

Website builders – Squarespace, Weebly, and Wix are popular choices -- offer some of the easiest and least expensive paths to create a web presence. In general, website builders are less powerful than a system like WordPress, but are easier to use. Website builders generally have visual page editors that make it easy to edit elements of the website. On the other hand, they aren’t very flexible, so they are best for smaller sites. Website builders do include hosting and sometimes cover the registration of a domain name, so you don’t need to worry about that configuration. Website builders commonly price their services at less than $10 per month.

WordPress is a content management system that is very powerful, but is also more abstract. Unlike website builders that allow you to drag and drop, WordPress users can choose a “theme” from the thousands available then use a WYSIWYG (what you see is what you get) interface to add and edit content. Users may also have to employ the occasional bit of code to edit a theme or plugin in WordPress, which makes it better suited for those with at least a little comfort around HTML. While it’s free, WordPress does require you to find a web host (which is often less than $5/ month). You’ll also have to pay $10 to $20 per year for a domain registration.

Finally, there’s the option to hand the entire site over to professionals. This is by far the most expensive option – costs can range from a few thousand dollars to more than $100,000, depending on the company doing the work and the size and nature of the site. The costs with this option are significant, but the possibilities are limitless.

What Kind of Site Do You Need?

In order to decide which option is best for you, you’ll need to determine what kind of site best matches your business.

A brochure site is the simplest site, and as the name implies, it’s a showcase of what your business does. The primary purpose of a brochure site is to give a company a credible web presence and provide some basic information to prospective customers with text, images, and maybe a video. It’s a good way to show your mission, pricing, examples of what you sell, and basic contact information.

If, on the other hand, you’ll be handling financial transactions, you’ll need an e-commerce site. An e-commerce site is a little more complicated, since it will have to be able to handle payment processing and allow you to easily add, remove, or edit products and services.

For some businesses, the site itself actually is the business. Web applications like project management tools, online fax services, or price comparison engines are all examples of web applications. While brochure sites and even e-commerce sites are possible to build with a CMS or website builder, an application is something you should only entrust to a professional website developer. If this is something you’re exploring, be prepared to spend at least $10,000 for a custom app that will stand out and function smoothly. 

Some websites combine both e-commerce and an application function (think Amazon). Unless you really know your way around website design, a hybrid site that will process a lot of requests and information should also be built by a pro.

Another way to look at what kind of site you’ll need is to ask yourself how important it will be to your business. If you’re a consultant, for instance, whose business is primarily based on existing relationships, you probably won’t be relying on a website to generate a large percentage of your business. If your website is generating less than 20 percent of your business, a simple brochure site should fill your needs. 

If your site will generate a more significant bit of business, perhaps more than 60 percent, it’s likely to be a site that will have more user demands and will have to perform multiple functions. Even if your website is simple, if it’s going to be responsible for the majority of your business generation, it’s best to hire a professional developer.

Your Skill Level.

If you’re a programmer who can build a website from scratch, the sky’s the limit. For the rest of us, there are options available for almost every skill level.

Website builders are the most basic tool, and as discussed above, also the most limited. However, they are extremely easy to use, and you don’t need to know anything about coding to jump right in and build a clean-looking site. If you can use PowerPoint, you can use a website builder.

WordPress requires a higher comfort level with basic web hosting and HTML, but is still a relatively easy system to use. It is more flexible and customizable than a website builder, but you should feel comfortable exploring the WordPress community to find the best design templates and plugins for your needs.

Keep in mind that whether you choose a website builder or WordPress, you’ll be in charge of the content and creative elements that make it stand out.

Your Budget.

Depending on whether you build your own site or hire a professional developer, a brochure site can cost anywhere from fifty dollars a year to more than $5,000. Most professional developers will charge at least $5,000 to build a nicely designed, mobile-friendly website.

If you’re building an e-commerce site, expect to spend a little more, since they’re more complicated. A website builder package that includes quality e-commerce features will typically cost about $300 per year, while a developer will cost at least $7,500, but the cost could be substantially more if you have even slightly more complicated functions on the website, like product categories or real-time inventory management.

Evaluate Your Options.

There are a few categories of business owners for whom hiring a professional web developer is almost certainly a must: businesses that are, or rely on, custom apps; businesses that expect to generate 100 percent of their business from the website; and business owners who are not comfortable or familiar with website builders. In these cases you’ll need expert guidance and know-how to make your site work best for your business -- just be aware of the budget requirements.

For those who expect to generate less than 20 percent of their business from their website, and who feel comfortable with basic programs like PowerPoint, a website builder is the best bet. You can get a professional looking site without spending a lot of time or money on an overcomplicated project. 

What if you’re in between? In that case you have myriad options to choose from, including using the extremely popular WordPress platform, which provides a great cost savings, but can be made to serve a huge variety of needs. In general, though, the higher the percentage of revenue you expect to generate from your website, the greater potential ROI you’ll get from an investment in your website.

Source: www.entrepreneur.com