For sub-Saharan Africa, the Informal sector is nothing new.  Indeed the types of activities carried out in this sector has existed even prior to colonialism.  Later, independence brought in the distinction between informal Vs. formal activities as countries around the region sought to formalize or “modernize” their economies.  The focus then (and indeed to some degree today) was rapid industrialization for much of the region.  If is the informal sector – not the formal sector – that is the growth engine.  It should be noted that around the world, about two-thirds of all employees work in the informal sector.  Thus how government treat the informal sector has profound impacts on employment, growth, equity and sustainability.

World Bank, 2009

The Informal sector is the part of the economy that is not taxed, organized, through legal but not monitored by the government or included in the GNP.  The informal economy was recognized in 1972, when the International Labour Organization (ILO) began its pioneering work on informality in the African economy with the Kenyan Multi-disciplinary employment missions.  ILO definitions include:

            “… the non-structured sector that has emerged in the urban centres as a result of the modern sector’s inability to absorb new entrants…”

International Labour Organization (1972).

            “… private unincorporated enterprises which produce at least some of their goods and services for sale or barter, has less than 5 paid employees, are not registered, and are engaged in non-agricultural activities including professional or technical services.

International Labour Organization (2002).

            The informal sector is characterized by a larger number of small-scale production and service activities that are individually or family-oriented and use simple labour-intensive technology.  The usually self-employed workers in this sector, have less formal education, are generally unskilled, and lack access to financial capital.  As a result, workers productivity and income tend to be lower in the informal sector than the formal sector.

            Nonetheless, some generalizations can be made about the causes of the informal sector’s growth in recent years include:

·         Bias by African leaders, international development agencies, international financial institutions to execute and support projects in urban areas, create laws and pursue development policies at the detriment of rural areas.

·         Recent migrants from rural areas who are unable to find employment in the formal sector.

·         Structural adjustment policies

·         Difficulty in establishing new firms.

·         Peace and the demobilization of military.

Their motivation is often to obtain sufficient income for survival, relying on their own indigenous resources to create work.  As many household are involved in the income-generating activities, including women and children, and they often work very long hours.  They generally lack public service such as electricity, water, drainage, transportation and educational and health services.  Others are less unfortunate, homeless, living on pavements, work temporarily as day labourers and hawkers under unhealthy weather condition.

            With the unprecedented growth rate of the urban population in developing countries, expected to continue and with the increasing failure of the rural and urban formal sectors to absorb additions to the labour force, more attention is devoted to the role of informal sector in serving as a panacea for the growing unemployment problem.

            The persistence and depth of poverty in Africa, and especially in the sub-Saharan region, appears to be strongly related to both the structure of employment and the very low level of productivity.  It is estimated by the ILO in Geneva, that 48 percent of non-agricultural employment in North Africa, is in the informal economy, and 72 percent in sub-Saharan region.  In rural areas some estimate are that the informal sector accounts for as much as 90 percent of non-agricultural employment.

            “Indeed informal sector employment in Uganda and Kenya now exceeds employment in the formal sector and nearly 90% of the labour force in Ghana comes from the informal sector.  Also many countries have not even collected data on the informal sector.”

African Union, 2008

            All the way from Lagos-Nigeria, to Moncef Bey – Tunisia, el hamiz – Algiers, Harare – Zimbabwe and the famous Derb Ghalef and Derb Omar Markets in Casablanca-Morocco.  Africans have resorted to the opportunities therein in the informal market, which makes breaking out seem to be a major development challenge.

            Zimbabwe, Tanzania and Nigeria have more than half their economies in the informal sector, while South Africa have just 28.4 percent (below the 41 percent average for developing countries world wide, but still more than the 18 percent in developed countries).

            The informal sector entails a loss in budget revenue by reducing taxes and social security contributions paid and therefore the availability of funds to improve infrastructure and other public goods and services.  This invariably leads to a high tax burden on registered labour, and of which the tax burden would be further pushed to consumers in form of high prices of goods and services.

            Finally, if economic growth is not associated with a movement into better employment opportunities or an improvement in the condition of employment in informal activities, the impact on poverty will be minimal.  This issue is central to realizing decent work, as a goal and for all workers, - to achieving the millennium development goals, and to promoting a fair globalization.  Please stay connected for more amazing insights…  Only Africans can save Africa.  Peace!

Obele Gospel Jesuite

CRO – Project Change Initiative

A 21^st Century Leadership, Organizational and Economic Development Strategist

For comments, please visit Obele Jesuite on facebook, @OBELEObele on twitter, gospel_obele@yahoo.com for email: or contact 08130070991.

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Capehi Ltd. is a registered Nigerian consulting outfit that provides expert services and solutions to Small and Medium Scale Enterprises (SMEs) in the area of Accounts Systems Management (ASM) and Information Technology (IT)  at a friendly cost.

At Capehi, we offer the following consultancy services:

• Accounts Systems Automation.
•  Secured Remote Access: Also called Online Accounting – This allows you manage your account system from any portable device while at home or on a trip or anywhere that is not your office.
• Capacity Building: We train your Accounting Crew on the latest available accounting systems management solutions for result optimization.
• IT Solutions

BENEFITS OF AUTOMATION

Finance/Accounting is a core business function. Therefore, any process that would enhance the performance of the Accounting function would enhance business performance. The benefits of Computerized Accounts System management are numerous; however, these few areas are highlighted:

•     Brings speed and accuracy in Accounts System Management.
•      Minimizes fraud in accounting process.
•      Ease of producing end of period reports.
•      Instant access to accounting information.
•      Easy documentation.
•      Improves efficiency of Accounting and Bookkeeping departments.
•      Easy computation of tax liabilities.
•      Reduces the work load of Accounting crew.
•      Supports effective internal auditing.
•      Compatibility and Integration.

Require our services? Reach us on:

Telephone: 08030655323, 07067638241.

E-mail Address: capehiltd@gmail.com, capehiltd@yahoo.com

Office Address: 20, Deco Road, Warri, Delta State; 8, 19 street, BDPA, Ugbowo, Benin-City, Edo State.

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          A story was once told of a Jewish man who spotted a swampy area in a part of Lagos Nigeria.  He made a move for its purchase and the owners (Nigerians) laughed at him saying “can anything good come out of this”, that why would such a man indicate interest to purchase a swampy land.  After all said and done the land was sold at a give away price.  That same land was developed and today, it’s what is popularly referred to as Victoria Garden City.

          It is not just large companies that are finding opportunities in Africa, but also visionary entrepreneurs.  Success has been the testimony with the likes of Innscor, who leveraged on the poor socio-economic state of Zimbabwe and has successfully built conglomerates.  Bidco in Kenya has created an oil business with more than $160 million turnover, while building over 51 percent market share in Kenya, and the company exports oil, detergents and other products to more than a dozen African countries.  Bill Lynch, CEO of South Africa’s Imperial Holdings transport group, with annual turnover of $6.2billion, was born in rural Ireland.  Lynch was named Ernst and Young world Entrepreneur in 2006, He told the Financial Times in 2006, “if South Africa grows at the expected rate of 6percent, his business should grow at 15 – 20 percent over the next few years.

          As previously noted, Asian governments and companies have recognized the opportunities in Africa, as Chinese merchants and products are evident across Africa, from low-cost televisions, to generators, clothing, shoes and other appliances.  Jincheng motorcycles race across the roads and in Nigeria.  Indian and Pakistan traders sell leather, clothing etc in Johannesburg South Africa.  The same is being repeated in Algeria, Tunisia, Egypt, etc.

          “The growing African trade and investment by China and India, particularly in sub-Saharan countries, is one of the most significant features of recent developments in the global economy”.

Harry Broadman

World Bank Economist

          A sino-African Summit in 2006, brought representatives of virtually all African countries to Beijing, China, where she pledged $5 billion in loans and credits to Africa during the summit.  The same was duplicated in New Delhi, India, in an organized India – Africa summit in 2008, which brought about the set up of major companies like Tata, Mahindra, Kirloskar and Ranbaxyin Africa.

          We have been known to be a consumption economy, thereby managing depreciation, without a steady increase in production.  The real sector has been seen to be a major driver of growth, and whose opportunities can be leveraged upon for poverty reduction, unemployment reduction etc.  A few Nigerians are actively involved in productive activities while some lack the touch of excellence, others are not appreciated by the market.  Findings reveal that Nigerians prefer the purchase of foreign items compare to locally made goods. As we continue on this track, we would experience increased capital flights, where foreigners invade our markets, employ Nigerians to seat in offices and work under unhealthy weather conditions, make their money and repatriate these funds to their home country, at the expense of the growth of the Nigerian real sector, which is spurred by poor discretionary policy measures. Please ponder on these things, as we continue next week under the same discourse.  Have a great week ahead.

Obele Gospel Jesuite

CRO-Project Change Initiative

A 21^st Century Leadership, Organizational and Economic Development Strategist

For Comment, please visit Obele Jesuite on Facebook,

@ OBELEObele on twitter, Gospel_Obele@yahoo.com for emails,

or contact 08130070991.

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London Stock Exchange

(Bloomberg)

The U.K. economy is heading for its fastest expansion since the onset of the financial crisis, economists said as they upgraded their forecasts for growth through 2015.
Gross domestic product will rise 1.3 percent this year and 2 percent in 2014, compared with predictions of 1 percent and 1.7 percent previously, according to the median of 48 economists in a monthly survey by Bloomberg News.

That pace of growth for next year would be the fastest since 2007, before the start of a slump that has left output more than 3 percent below its peak.
For Bank of England Governor Mark Carney, the question is how quickly this recovery can lower the country’s unemployment rate after he introduced forward guidance last month and linked the jobless rate directly to the policy stance.

That measure hasn’t yet been effective, according to more than two thirds of economists in a separate survey.
“The consensus forecast has moved a long way very, very quickly,” said Jens Larsen, an economist at RBC Capital Markets in London and a former BOE official.

“If you get a very powerful recovery, the arguments for guidance, for the extended period of low rates, just look so much weaker. It’s a bit of a communication challenge.”
The economists in the Bloomberg survey see GDP growth accelerating to 2.4 percent in 2015.

Consumer spending will rise 1.6 percent this year and in 2014, while exports will increase 1.8 percent and 4.7 percent.
Guidance Framework
Bloomberg reports that under its so-called forward guidance, the nine-member Monetary Policy Committee has said it won’t consider raising the benchmark interest rate from a record-low 0.5 percent until unemployment falls to 7 percent, which they don’t see happening until late 2016.
That projection is being challenged by recent data, and economists are more optimistic, with 19 of 31 forecasting that it will fall below the threshold before 2016.
Data this week showed the unemployment rate fell to 7.7 percent in the three months through July from 7.8 percent in the second quarter.

The labor-market report also showed that jobless claims in the past two months have fallen by the most since 1997.
Government figures today showed construction output, which accounts for 6.3 percent of the economy, climbed 2.2 percent in July.

In the second quarter, new building orders surged almost 20 percent from the previous three months, boosted by demand for homes as well as wind turbines and solar farms. Overall housing orders between April and June were the strongest since the fourth quarter of 2007.
Difference of Opinion
BOE policy makers say productivity will pick up as the economy recovers, meaning companies will get more output from their existing workers, which will limit the pace of hiring.

Carney said yesterday that a difference of opinion between the central bank and other forecasters is “natural.”
“The market had a more positive view of the rate at which unemployment will come down and a more pessimistic view of productivity,” he said at a hearing of the Treasury Committee, a panel of lawmakers that scrutinizes the BOE.
Economists’ more positive outlook for the U.K. follows economic growth of 0.7 percent in the three months through June as well as a continued strengthening of services and manufacturing this quarter.
- Thisdaylive

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DHL has said that the United Kingdom and United States  accounts for about 37 per cent of its export from the country and Nigeria is the second largest market in Sub-Saharan Africa.

Speaking at a briefing, Managing Director, DHL Express Sub-Saharan Africa, Mr. Charles Brewer, noted that Nigeria is closely behind South Africa and the sub-Saharan region is currently the fastest developing one globally.

Great Britain has 21 per cent of the export of DHL products from the country, United States 16 per cent, South Africa 5% and  Canada 5%.

For the inbound products, United States 28 per cent, Great Britain 21 per cent, Germany 7%, France 6% and Italy 7%.

The products that DHL moves include documents 43 per cent, non-documents 12 per cent – mainly oil tools, aircraft spares and samples; import express 12 per cent – mainly IT equipments, machinery and spare parts; other products – 33 per cent. Brewer stated that Nigeria is seen as strategic business hub for DHL in Africa and the small and medium enterprise (SME) is the engine for growth for Nigeria.

He also affirmed that the take-off point for Africa and its vast potentials lies in the big opportunities in the SMEs and DHL is ready to assist and empower the SMEs in the country.

According to him: ”Nigeria is an attractive market for us and, with a population of over 160 million and a GDP growth rate of 7% presents a major opportunity. The opportunity is for us is to expand our footprint within the country and service semi-urban and rural areas so that anyone – from a student to a small business – can access our network.

“And the over 220 countries and destinations that we serve. There are hundreds of SMEs in Nigeria and we need to provide easy access and a team of highly trained Certified International Specialists to lead them to the very obvious opportunities that trading with the world can present.

“Despite the current global economic uncertainty, DHL expects the African region to deliver. As we see the continent ‘surge’ as a result of sector investment, increased consumer spending and economic activity, the future is still bright for the continent. DHL is committed to becoming their provider of choice and as part of that journey we will provide even more access points across Nigeria.

Apart from the expansion of its retail footprint, Brewer’s other priority is around people development and employee engagement are the key to sustainable development.
- The Vanguard

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CBN Governor, Sanusi Lamido Sanusi

The Central Bank of Nigeria, CBN, said that deposits from some government institutions are excluded from the reporting of public sector deposits in line with its circular to banks operating in the country.

The institutions are: Asset Management Corporation of Nigeria (AMCON), Bank of Industry (BoI), Nigerian Export-Import Bank (NEXIM),Federal Mortgage Bank of Nigeria (FMBN), Bank of Agriculture (BoA), ,Bank of Infrastructure, Closed Pension Funds belonging to government institutions, state pension Boards, governments staff associations and cooperative societies.

The CBN states, “Following the issuance of our circular ref: BSD/DIR/GEN/LAB/06/034 and dated 25th July 2013 on the review of the Cash Reserve Requirement for Deposit Money Banks( DMBs), it has become necessary to provide further guidance on the reporting requirements.

“It would be recalled that in our circular under reference, DMBs were required to report government deposits as additional memorandum items in their Monthly Bank Return/Daily Bank Return (MBR 300/DBR 300) on e-FASS. Subsequent to the above, all DMBs are requested to note that, for the purposes of reporting in accordance with the provisions of the above circular, public sector deposits should include all Federal Government MDAs and companies, state government MDAs and companies as well as local government MDAs and their companies.

“Furthermore, for the avoidance of doubts, deposits from the following institutions should be regarded as public sector for this purpose: NNPC Joint Venture accounts; Sovereign Investment Funds; Government MDAs/Companies’ Collection Accounts such as: Customs, FIRS, etc; Pilgrim welfare Board; All accounts belonging to Government Universities.”

Also, the CBN have berated banks for not disclosing credit granted to their board members and employees.

The apex bank disclosed this in a circular signed by Director of Banking Supervision, Mrs Tokunbo Martins, titled “Reporting of All Credit Facilities of N1 million and Above in the Credit of Risk Management System”.

According to her, the Central Bank of Nigeria has observed with dismay that banks do not report the credit facilities availed to their board members and staff in the Credit Risk Management System (CRMS). For the avoidance of doubt, the CRMS, which is a central database for credit information on borrowers, established by the CBN Act No. 24 of 1991 [Sections 28 and 52] as amended made it mandatory for all banks to render returns to the CRMS in respect of all credit facilities of N1 million and above. Thus, the credit facilities availed to board members and staff of banks are not exempted.”
- The Vanguard

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CBN Governor, Mallam Sanusi Lamido Sanusi

The Central Bank of Nigeria (CBN) Wednesday said it would severely sanction banks that do not report credit facilities of N1 million and above availed to their board members and staff members.

The central bank gave the warning in a letter titled: ‘Reporting of all Credit Facilities of N1 million and above in the Credit Risk Management System (CRMS)’, addressed to all banks.

The letter, dated September 10, 2013, signed the Director of Banking Supervision, CBN, Mrs. Tokunbo Martins, was posted on the apex bank’s website. It expressed dismay that banks do not report credit facilities availed to their board and staff members in the CRMS.

According to the central bank, the CRMS, which is a central database for credit information on borrowers, established by the CBN Act No. 24 of 1991 (Sections 28 and 52) as amended, made it mandatory for all banks to render returns to the CRMS in respect of all credit facilities of N1 million and above.

Therefore, it stressed that the “credit facilities availed to board members and staff of banks are not exempted.”

“Please note that the provisions of Sections 3.4 and 3.5 of the Prudential Guideline for Deposit Money Banks in Nigeria, July 2010, does not preclude banks from reporting credit facilities availed to its board members and staff in the CRMS.

“Banks are therefore required to report all credit facilities (principal plus interest) of N1 million and above availed to their board and staff members in the CRMS as well as regularly update these credit facilities on monthly basis. This Circular serves as a reminder and warning to all banks as any observed breach will attract severe sanctions,” it explained.
- Thisday

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The United States Trade and Development Agency (USTDA) has offered grant to Main One, to support a feasibility study on the extension of a fibre optic network from Lagos to Port Harcourt, Rivers State.
The grant will enable Main One to evaluate the technical and financial feasibility of extending 300 miles of undersea fibre optic cabling and supporting infrastructure between two of the country’s most important commercial centres.
Speaking at the signing ceremony of the initiative, USTDA Regional Director for sub-Saharan Africa, Paul Marin, said the project is important as it will help promote the drive for internet pentration in the country.
“This project is an important example of Main One’s commitment to bring high-speed broadband access to Africa. We are proud to be supporting Main One in their efforts to provide the infrastructure for broad-based economic growth in Nigeria,” he said. Marin was represented by the United States of America (USA) Consul General, Jeffrey Hawkins on the occasion.
Chief Executive Officer of Main One, Funke Opeke, said the grant will deepen the provision of broadband services in the Niger Delta region and boost the economy of the region. “We are appreciative to the USTDA for this important grant aimed at furthering the development of broadband services and economic development in the oil-producing Niger Delta region,” she said.
The grant was signed by Hawkins on behalf of USTDA and Opeke for Main One, at the residence of the Hawkins.
- The Nation

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Aliko Dangote, CEO, Dangote Group of Companies

When Shell Petroleum Development Company’s (SPDC) executive director, Malcolm Brinded said recently that building a refinery in Nigeria did not make good business sense, he apparently had not reckoned with Aliko Dangote.

Africa’s richest man, Dangote has a history of being a disrupter of most industries he chooses to play in, like cement, sugar, and flour, and his foray into the oil sector with plans for a new 400,000-barrel-a-day (b/d) refinery has the prospect of shaking up Nigeria’s stagnant oil and gas industry.

The immediate area where Dangote’s refinery investment may push the government into reforming is in the elimination of fuel subsidy, say analysts.

“We are encouraged by recent plans announced by Aliko Dangote to build a new local refinery with a 400kb/d capacity, which should improve pricing terms for local producers,” said Renaissance Capital oil and gas analyst Lldar Davletshin.

“If a local refinery buys crude at world price it will then have to sell refined product with a mark-up, which would mean much higher domestic prices if no subsidy is provided,” Davletshin said.

Nigeria’s gross domestic product (GDP) grew steadily at about 7 percent per annum over the past 10 years with a population of 167 million.

Analysts say the country’s energy thirst is rapidly increasing (from the currently extremely low 300kb/d level), which should make the current fuel subsidy regime unsustainable in about three years, just as Dangote’s new refinery is coming on stream.

Refining “is an excellent business to get into,” Dangote said in an interview in May, suggesting it will be in a position to make a profit, by selling at international rates to fuel marketers.

The refinery would also shake up the entrenched international oil companies (IOCs) in Nigeria, as well as the notoriously opaque national oil company – NNPC, which has the poorest transparency record out of 44 national and international energy companies, according to Transparency International and Revenue Watch Institute.

The NNPC gets an allocation of 445,000bpd of crude oil to refine locally, but it has been selling itself this oil at cut-down prices, a practice that cost Nigeria $5 billion in potential revenue between 2002 – 2011, according to a 146-page report by Nuhu Ribadu, former head of the anti-corruption agency, EFCC.

Dangote’s new refinery would immediately double Nigeria’s refining capacity and reduce dependence on NNPC decrepit refineries as well as cut imports from refiners owned by the IOCs by up to 50 percent.

Its expected 100 percent capacity utilisation may convince the government and prove to sceptics of the need to privatise Nigeria’s four state-owned refineries.

Dangote’s new refinery, fertiliser and petrochemical complex would cost $9 billion. This compares with the NNPC $4.5 billion deal with an unknown ‘Vulcan Group,’ to build six modular refineries with a combined capacity of 180,000b/d, signed since early 2012, which has remained largely on the drawing board.

Nigeria, which is Africa’s top producer of crude oil, relies on fuel imports to meet more than 70 percent of its needs. Four government-owned refineries with a combined capacity of 445,000b/d are operating at a fraction of that because of corruption and poor maintenance.

Nigeria spent over N1 trillion ($8bn) on fuel subsidy payments last year, equivalent to 20 percent of the total federal budget, according to finance ministry data.

“Removing the fuel subsidy would be a major step forward in the reform process in Nigeria,” Samir Gadio, an emerging markets strategist, at Standard Bank, London, said, saying “clearly, this inefficiency is a major constraint on the country’s economic emergence which will eventually have to be addressed.”

President Goodluck Jonathan attempted to remove the subsidy in January 2012, but was forced by a wave of strikes and protests to partially reinstate it, at a reduced price of N97 per barrel. Another attempt by the government at deregulation would only come after the elections in 2015, according to FBN Capital.

The oil and gas industry accounts for 70 percent of the Federal Government budget and 90 percent of the nation’s dollar earnings. The Petroleum Industry Bill aimed at reforming the industry is currently stuck in the National Assembly, although Dangote’s move to establish a refinery may have already set in motion a reform of the industry.
- BusinessDay

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China's President, Xi Jinping

Kazakhstan and China will sign 22 agreements on Saturday worth a total of around $30 billion, including several deals in the key oil and gas sector, Kazakh President Nursultan Nazarbayev said.

“Among these (agreements) there are large-scale ones, including on cooperation in the oil and gas sector, which are essential for us,” Nazarbayev told a briefing after meeting with China’s President Xi Jinping.

“We have reached an agreement on building a new oil refinery (in Kazakhstan), which we need so much,” Nazarbayev said, without giving further detail.

Xi said the two sides had agreed on China’s shareholding in Kazakhstan’s giant Kashagan offshore oil project. Kazakh officials told Reuters earlier on Saturday that the package of agreements would include one on the purchase of an 8.33 percent stake in Kashagan by China’s state oil firm CNPC for around $5 billion.

One of the draft agreements, obtained by Reuters, would guarantee loans from The China Development Bank and The Export-Import Bank of China – worth respectively $3 billion and $5 billion – to Kazakhstan’s state holding Baiterek, which is charged with promoting innovation and industrial projects.
- Reuters

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Minister of Finance, Ngozi Okonjo-Iweala

The bonds will be issued in N1, 000 per unit, subject to a minimum subscription of N10, 000 and in multiples of N10, 000 and in multiples of N1, 000 thereafter.
The Federal Government (FGN), through the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO), is to offer its bond for the month of September.
An ‘offer-circular’ by the DMO’s showed that the Federal Government is offering for subscription by auction and its authorization to receive applications for N35billion at 13.5 per cent (August 2016) three year re-opening and N35billion at 10 per cent (July 2030), 20-year re-opening.
“The Central Bank of Nigeria, on the authority of the Debt Management Office on behalf of the Federal Government of Nigeria offers for subscription by Auction is authorized to receive applications for N35billion at 13.5 per cent (August 2016), three year re-opening and N35billion at 10 per cent (July 2030), 20-year re-opening” the circular published on the DMO website said.
A government bond, otherwise known as debt security, is usually issued in local currency by a national government, with a promise to pay periodic interest payments and to repay the face value on the maturity date to support government spending.
Government debt is money owed by any level of government and is backed by the full faith of the government. Before investing in government bonds, investors usually assess several risks associated with the country’s various risks centres, including country, political, inflation, and interest rate risks.
FGN bonds are Federal Government of Nigeria securities issued under the authority of DMO. Since 2003, DMO has been regulating the activities of the FGN bonds market, while the Central Bank of Nigeria acts as the Issuing House and the Registrar.
Summary of the offer
The Federal Government is the issuer of the bond. In terms of units of sale, the bonds would be issued in N1, 000 per unit, subject to a minimum subscription of N10, 000 and in multiples of N10, 000 and in multiples of N1, 000 thereafter.
For Re-openings of previously issued bonds (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date. The interest Payment is payable semi-annually.
Interested investors were advised to contact some designated Primary Dealer Market Makers (PDMMs), with the bond’s auction date fixed for September 11, 2013, while settlement date is September 13, 2013.
The status of the FGN bonds qualifies as securities in which trustees can invest under the Trustee Investment act. It also qualifies as government securities and is listed on the Nigerian stock Exchange.
All Federal Government bonds qualify as liquid assets for liquidity ratio calculation for the banks and are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria.
- Premiumtimes

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CBN Governor, Lamido Sanusi

Contrary to the recent drop in the value of the nation’s external reserves, the Central Bank of Nigeria on Monday dismissed claims that the reserves were experiencing sharp decline, adding that the current value of $46bn showed that the fundamentals of the economy remained strong.

The CBN Governor, Mr. Lamido Sanusi, said this at the opening ceremony of the regional course on reserves and foreign exchange management.

The course, which was organised by the West African Institute for Financial and Economic Management, was targeted at how foreign reserves could be optimised to generate income.

Sanusi, who was represented by the Deputy Governor, Operations, CBN, Mr. Tunde Lemo, said, “Nigeria’s foreign reserves have not been declining; our reserves level is about $46bn and that’s still very strong, which is approximately 11 months of imports.

“The fundamentals of the Nigerian economy are still very strong and occasionally, there might be increase or decrease, but it has been hovering between $45bn and $47bn, and that is very strong.

“In Africa, it is either the second highest or third highest. I think it is the second highest only after Algeria, and that’s really very remarkable.”

The foreign reserves had been hovering between $47bn and $48bn since February 20, 2013, when the nation recorded N46.96bn. The CBN data had shown that the reserves dropped from $48bn on June 28 to $47.6bn on July 2, 2013.

The $47.6bn reserves, however, represented about 30.5 per cent increase over the $36.6bn recorded on July 2, 2012.

On July 16, the external reserves dropped further to $46.99bn.

The Federal Government had at the beginning of the year targeted an external reserves balance of $50bn.

Sanusi also explained that in spite of the uncertainties in the global economy, which had made major economies to cut interest rates in order to provide market liquidity, Nigeria’s external reserves would be invested in a currency mix that would optimise returns for the country.

He also allayed fears about the uncertainties of the Nigerian economy,  stating that the country’s reserves, which currently stood at about $46bn, could finance about 11 months of importation.

The move to invest the reserves in other currencies other than the dollar, according to him, is necessary in view of recent events in the global economy that have driven yields to historical low levels.

He said, “A major concern among central banks in recent times is how to generate income from foreign exchange reserves without compromising the reserves management objectives of safety and liquidity.

“Liquidity and safety are far more important and they come before returns management.

The central bank boss said since the financial crisis of 2008, reserves managers had come under increased pressure to find ways of enhancing income.

This development, he noted, had made the CBN to diversify its reserves portfolios by investing in the Chinese Renminbi.
- The Punch

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Minister of Power, Prof. Chinedu Nebo

Top officials of the Nigerian Electricity Regulatory Commission and the Bureau of Public Enterprises have met to work out modalities for the transfer of electricity companies carved out of the Power Holding Company of Nigeria to private sector investors.

The Assistant General Manager, Media, NERC, Maryam Abubarkar, confirmed this development in a statement made available to our correspondent in Abuja on Monday.

Present at the meeting, according to the statement, were the Chairman, NERC, Dr. Sam Amadi, and Director-General, BPE, Mr. Benjamin Dikki.

The meeting was held despite disagreements between the Technical Committee of the National Council on Privatisation and the BPE over the extension of time for preferred bidder for the Enugu Electricity Distribution Company, Interstate, to pay the 75 per cent balance of the bid price.

Although details of the decisions reached between the two government agencies could not be ascertained, Abubakar said the issues tabled at the meeting included the application of the Fit and Proper Guidelines and the business plans of the core investors.

Others were the framework for monitoring and enforcement of transaction agreements, and the formalisation of contracts pertaining to transmission, power purchase agreements, vesting contracts and gas supply agreements.

According to the statement, Amadi emphasised the importance of preparing grounds for a successful takeover by the investors.

He maintained that NERC would on its own strengthen the laid down procedures for monitoring and enforcement.

Amadi also stated that a priority of the commission was customer metering, without which, he said the industry could not stand.

The NERC boss said the owners of the new distribution companies would be required to adopt the existing metering scheme put in place by the commission or to provide a better alternative.

Another meeting has been scheduled for next week to review the Fit and Proper Guidelines as well as to agree on the mechanism for dealing with liabilities incurred post-handover, Abubakar said.

Eighteen electricity firms were carved out of the PHCN as part of the process to reform the electricity generation and distribution industry.

These included the Transmission Company of Nigeria, 11 distribution companies based on geographical coverage and six generating companies.

Out of the successor companies, core investors have emerged for 10 distribution companies and five generating companies. The process for the emergence of core investors for Afam Power Plc (a generation company) and Kaduna Electricity Company is currently ongoing.

While the prospective core investors have concluded payment for nine Discos, the payment for the Enugu Electricity Distribution Company has been shrouded in controversy.

The preferred bidder for the company, Interstate, owned by business mogul, Mr. Emeka Offor, failed to meet the August 21 deadline to complete the payment.

However, the privatisation agency has failed to invite the reserve bidder, Eastern Electric, being promoted by a former Minister of Power, Prof. Bath Nnaji, to take the slot as required by the privatisation rule.
- The Punch

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Acting DG, PenCom, Chinelo Anohu-Amazu

The National Pension Commission has transferred a total of N7bn pension contributions of workers under the defunct Nigerian Social Insurance Trust Fund to the Retirement Savings Accounts of the contributors in line with the requirements of the Contributory Pension Scheme.

According to figures made available to our correspondent on Thursday, the N7bn has been transferred into 92,655 RSAs.

PenCom said it recently received 3,752 applications from Trustfund for the transfer of N242.44m to the respective RSAs of the contributors.

The commission said it had earlier reviewed and approved the transfer of N241.62m to the RSAs of 3,743 applicants.

“This brought the total amount and contributors for whom NSITF contributions were remitted to their RSAs to N7bn and 92,655, respectively,” it noted

PenCom said the remaining applications were rejected due to incomplete documentation, zero balance or duplicated applications.

It said that in order to fast-track the transfer of the NSITF contributions into the RSAs of the contributors, PenCom, in conjunction with Trustfund, initiated the matching of the RSAs records with that in the NSITF database.

The commission said in furtherance of the matching of the records, the guidelines on the transfer of NSITF contributions were further amended to accommodate this new activity.

Under the old pension scheme, the National Provident Fund was established by an Act of Parliament in 1961 to regulate private sector pension schemes in the country. It ensured monthly contributions from the basic salaries of workers and their employers’ contributions.

The NPF was later converted to a limited social insurance scheme and administered by the NSITF from 1993.

However, through the Pension Act of 1979 and the activities of the NSITF, pensioners were subjected to difficulties as a result of the non-payment of their pensions.

This scheme was not funded, which led to mounting pension liabilities, and made it to become unsustainable.

The development led to the repeal of the 1979 Act and subsequent amendment of the NSITF Act of 1993.

The Pension Reform Act 2004 was promulgated and it established a contributory scheme for the payment of retirement benefits of employees in the public service of the federation, the Federal Capital Territory and the private sector.

The President, Pension Fund Operators of Nigeria, Mr. Dave Uduanu, said that the CPS had been recording some achievements.

He said that the PRA 2004 was also being reviewed.

According to him, the PFAs are jointly working to ensure that they improve the pension industry for the benefit of the pensioners.

He said the operators were looking at having a shared services platform for the industry in order to reduce areas of duplication.
- The Punch

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CBN Governor, Sanusi Lamido Sanusi

              Access Bank had its 2013 half year investor presentation.
The Central Bank of Nigeria’s policy on the increment of Cash Reserve Ratio (CRR) on public funds deposited in banks is taking its toll on the banks.
Access Bank, one of Nigeria’s banks, licensed by the Central Bank of Nigeria as an International Bank, highlighted the impact of this policy in its 2013 half year investor presentation released last week.
According to the bank, the CRR on public sector of 50 per cent (from 12 per cent) in the third quarter of 2013 is having a “negative impact on the Nigerian banking industry earnings” adding that there is an “increased pressure on the cost of funds for banks”, given the reduced dependence on banks on public sector deposits.
The bank said that compliance with this policy would impact on its earnings an estimate of N3 billion in 2013.
The bank also highlighted other pressure points on banks’ earnings which include the Central Bank’s revised guide on bank charges. These include the COT which was reduced from N5 to N3/million in 2013, and to be completely phased out by 2016, the interest on savings which was increased to 30 per cent of MPR: and 3.6 per cent paid on savings from about 1 per cent.
The bank said these policies are having “Increased pressure on non-interest income for Nigerian banks and that the estimated impact of these on Access Bank’s earnings is about N6bn in 2013.”
Another issue it lamented was the increase in AMCON Charge. There was an increase in banks’ AMCON levy from 0.3 per cent in 2012 to 0.5 per cent of total assets in second half of 2013. The bank said this move would only end up increasing banks’ cost base. It said the impact on Access Bank’s Opex was estimated at N7.2 billion in 2013.
Highlights of 2013 half year result
The bank’s Net interest Income (NII) declined by 29 per cent to N39 billion year-on-year but up 29 per cent to 22 billion from 17 billion quarter-on-quarter. Net Interest Margin (NIM) improved by 60 basis points (bpts) from the depressed first quarter 2013 level to 6.8 per cent in second quarter (QoQ), Non-Interest Income was up N5.3 billion or 20.9 per cent YoY to N30.7 billion and down N6.9 billion or 36.7 per cent QoQ to N11.9 billion, Operating expenses up N5.4 billion or 11.2 per cent YoY to N53.8 billion and N4.4 billion or 17.8 per cent QoQ to N29.1 billion, while the contribution of Non-Interest income to gross earnings increased to 30 per cent in first half 2013 from 23 per cent.
Profit Before Tax (PBT) declined by 13 per cent to N26 billion in half year 2013 but increased by 36 per cent to N15 billion QoQ. Funding cost increased by 16 per cent in half year due to high interest rate environment, loan growth of 11 per cent from N623 billion in Q1 to N691 billion in Q2, 14 per cent reduction in interest income from earning asset resulting from sale of AMCON bonds in second half year 2013 and non-interest income declined by 36 per cent QoQ as a result of significant non-recurring dividend income from Q1.
Key drivers of the half year results, according to the bank, include growth in interest expense due to high cost of funding due to high interest rate environment. The growth was driven by increased transaction volume, strong dividend income and good trading performance; significant decline in premium income from WAPIC (Insurance) (seasonality), increase in AMCON surcharge and other non-recurring expenses such as additional NDIC premium, (N568 million) claim expenses by WAPIC (N1.3 billion), depreciation adjustment (N768 million), professional fees and branding cost (N560 million) and card charges (N600 million) among other parameters.
Covering up anticipated earnings shortfall

With these anticipated shortfalls in banks’ earnings due to varying regulatory policies, Access Bank highlighted set targets for second half 2013, as well as paths to which it can improve it services to its customers and attract new ones, while hoping to generate more earnings doing so.
The bank said Personal Banking is one of the focus of its growth priorities and it intends to upgrade telemarketing centres to improve customer contact (up 90 per cent) from once in 2 months to once every month, improve cross selling, increase product penetration, increase alternative channels such as online banking, verve banking centre and mobile banking to drive transaction activities, generate fee income and focus on growing low cost deposits whilst increasing customer base.
On growth projection, it intends to reactivate 500, 000 dormant accounts, increase active internet banking users from 100, 000 to 500, 000; 40,000 walk in customers monthly, Grow Salary Account by additional 250, 000. Also, it hopes to achieve a loan growth of N10 billion by 2013 financial year end (Personal loans: 2 billion, Credit Cards: 2.5 billion, Vehicle finance: 3.5 billion, Mortgages: 2 billion) and an income uplift of N1billion among a series of other strategies.
Despite these odds, the Central Bank’s policy is here to stay, at least, in the short time.
Ayodeji Ebo, a Research Analyst at Afrinvest, an investment bank, said there was pressure in the market following the policy announcement, as banks scrambled for funds to meet the new Central Bank’s requirement. The Cash Reserve Requirement (CRR) on public funds was raised to 50 per cent, thereby necessitating a sell down on investments where these funds have been invested.
He said the Central Bank is worried about banks’ practice of sourcing public sector deposits at fairly cheap rates and lending the same to government via its fixed income securities, at higher rates. So basically, they collect money from the government and borrow the government via treasury bills and so on. According to him, the banks will have to call back their funds from the sources they have invested in and source for more deposits; at perhaps, higher rate, to comply with the policy.
Government’s deposit with the Central Bank is currently estimated at N2.6 trillion with federal government constituting 50 per cent (N1.3 trillion) and State and local governments approximately 20 per cent of N1.3 trillion.
Mr. Ebo said bank’s lending rates may rise due to the development, but they may still remain in the 20’s, as lending rates have proven over time, to be inelastic to changes in market dynamics.
“It is a further contractionary measure by the Central Bank. The impact of this policy will quarantined an additional 38 per cent of bank’s deposit from the public sector, as they already have 12 per cent as reserve across all their deposits. Hence, the banks will need to sell down and raise 38 per cent of their deposit (from the Public sector),” he said.

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CBN Governor, Sanusi Lamido Sanusi

 Only a few banks have adhered to CBN’s directive.
Nigerian banks have not shown much eagerness to speed up the requirements of the Central Bank of Nigeria on cheque truncation, one of the fundamentals for a successful cashless policy which includes signing on cheque truncating applications.
The current cheque truncation regime is planned to reduce the cheque clearing cycle from T+2 to T+1. Cheque truncation is one of the instruments necessary for the actualisation of the cashless regime and it is just being implemented in Nigeria, in accordance with the Central Bank’s policy.
Recently, Nigeria InterBank Settlement Systems (NIBSS) and Nigeria’s leading financial services software provider, Precise Financial Systems, PFS, collaborated with the Central Bank to achieve the cheque truncation exercise across the 37 branches of the Central Bank in states capital in Nigeria including the Federal Capital Territory, Abuja.
According to the firm, as of today, only a few of the banks including Sterling Bank, FCMB, Access Bank and Mainstreet Bank have demonstrated this readiness when they recently signed on iTeller, an indigenous cheque truncation application.
The iTeller application is a suite of integrated solutions that comprises Automated Teller Machine (ATM) based self-service cheque lodgement, cash lodgement/withdrawal and cashier’s desktop transport cheque scanning system for a state-of-the-art and an end-to-end branch level cheque truncation capability as well as a slip-free banking experience.
The iTeller application is presently a T+0 ready system with an ultra violet cheque scanning ready solution.
In a statement signed by Yele Okeremi, Managing Director, PFS, the company running the iTeller application, the platform provides an optimal mix of both hardware and software for capturing, through in-built scanner and processing of cheques presented by customers for lodgement while the design concept ensures a proper handshaking with the bank’s core banking application.
“The cheque truncation is already on. The latest and most remarkable achievement is the signing on of iTeller by the Central Bank, the regulatory agency behind the cheque truncation policy. Coming on the heels of that is the signing on of Sterling Bank, FCMB, Access Bank and Mainstreet Bank”, he said, adding that iTeller runs a simple model for cheque truncation processes and challenges the status quo.
According to him, with iTeller, banks now have access to the full compliments of its functionality, which include auto email alerts for back-office processing of remote cheque lodgement at ATM by customers.
“iTeller’s cheque truncation design makes it very flexible for any of these banks to decide whether to truncate its cheques at the branch level or cluster level. Any of the truncation models comes ready with a central processing centre that enables a bank to perform its central clearing cheque processing functions for both outwards and inward cheques”, he said.
He added that the application would give the banks the cutting edge in the industry, as they now have what it is required to implement cheque truncation as prescribed by the Central Bank, which is to reduce the cheque clearing cycle from T+2 to T+1.
According to him, the application was built to accommodate current industry practices while incorporating other foresights into future trends that would soon unfold in the industry.
iTeller has been in development for the past eight years, according to the firm.
Some of its features include branch-level cheque clearing, auto-generation of receipts at terminal point, auto-generation of capture file, accounting entries generation and posting, auto-generation of caution notices. Others are cheque images repository that would enable the banks to service their customers with respective cheque albums. the application provides an optimal mix of both hardware and software for capturing, through in-built scanner and processing of cheques presented by customers for lodgement.  The design concept ensures a proper handshaking with the bank’s core banking application.
The application offers flexibility in features and ease of usage, effectively meeting the banks’ requirement for customer service delivery, core banking double-entry postings, cheque-clearing processing and management information provisions.
The management of the firm said the company commenced the designing of the application at that time because it had foreseen that the prevailing situation today would in the medium term, become a reality.
With the dateline of June 2013 for all banks to become truncation compliant and ready, most of the banks are still in the process of selecting their service providers, according to industry watchers.
According to them, it is expedient for the banks to acquire good platforms and applications to enable hitch free cheque truncation processes.
- Premiumtimes

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Aliko Dangote

A major milestone towards the construction of Nigeria’s first private and Africa’s largest petroleum refinery will be reached on September 4, with the signing of a term loan between Dangote Group and a consortium of local and foreign banks for the financing of the project.

Dangote Group is committing an equity of $3.5 billion to the massive project, BusinessDay has learnt. In what could be the single largest contribution to the Nigerian government’s economic transformation agenda, Dangote Group plans to invest $9 billion to build the largest refinery/petrochemical/fertiliser complex in Africa at the Olokola Liquefied Natural Gas (OKLNG) Free Trade Zone.

According to a company official, “we are not resting on our oars as we seek to make possible what could be the single largest contribution to this government’s economic transformation agenda, with our investment of $9 billion in the largest refinery/petrochemical/fertiliser complex in Africa.”

Dangote plans to raise additional $2.25 billion from the DFIs and ECAs to augment its equity contribution of $3.50 billion. The Group reported that due to the vastly improved investor friendly environment in Nigeria, there was a tremendous response by reputable international finance organisations to participate in this syndication.

Dangote Group has in the last five years increased 10-fold to a market capitalisation of $22 billion and today accounts for over 30 percent of the total market capitalisation of the Nigerian Stock Exchange.

The Group said that its massive expansion in the last five years has coincided with the tenure of this administration and have been due mainly to the formulation and implementation of progressive policies of this government, like the cement backward integration policy that has seen Nigeria achieve self-sufficiency in cement production.

A company spokesman said, the “administration has helped create and maintain the enabling environment that has encouraged it to invest over $6 billion in the Nigeria cement manufacturing industry in the last seven years.”

Aliko Dangote, Africa’s richest man, recently unveiled the Group’s plan to invest up to $8 billion to build a Nigerian oil refinery with a capacity of around 400,000 barrels a day and it could come on stream by 2016.

Dangote Group has chosen to walk a path where others have been unable to thread, and analysts said last night they expect the refinery to help cut Nigeria’s oil import volumes significantly while also helping to deal a blow on the opaqueness around the subsidy management system. Nigeria’s installed refined capacity today stands at 415,000 barrels per day, but the government-owned refineries in Port Harcourt, Warri and Kaduna operate at around 30 percent of capacity.
- BusinessDay

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Minister of Power, Prof. Chinedu Nebo
The Minister of Power, Prof. Chinedu Nebo, on Monday said the Federal Government had designated $1.6bn for the expansion of power transmission facilities in the country.

He said a substantial part of the fund came in form of loans from the World Bank, African Development Bank and Chinese Exim Bank as well as proceeds from the Eurobond sales.

Nebo said this in an interview with State House correspondents after a meeting of the Presidential Action Committee on Power presided over by President Goodluck Jonathan at the Presidential Villa, Abuja.

He said with the privatisation of the power sector, its success would soon dwarf that of the telecommunication sector because the step would re-energise the nation’s economy.

The minister said much of the deliberations at the meeting dwelt on expanding the transmission network in the country to ensure that all the power generating plants had adequate capacity to pull out electricity.

He said, “The presentation today (Monday) was by the Transmission Company of Nigeria and that was to explain to the PACP all the things we need to do to make sure that all the power generated between now and several years to come, that the capacity is there to do that and also to point out the funding gaps and be thankful to the President and National Council on Privatisation, Niger Delta Power Holding Company and Federal Ministries of Power and Finance and Petroleum, and much of what is needed to do these things are being put in place.

“We also have substantial amount of funding coming in form of loans from the World Bank, African Development Bank, Eurobond issuance, and the Chinese Exim Bank the NDPHC. $1.6bn has already been designated for the expansion of transmission facilities in the country.”

Nebo added, “The government is adequately prepared, everybody is excited at what has just happened, that we had such a significant compliance of all the preferred bidders, who bought the Gencos and the Discos as you can very well tell, most of them have paid up and most people thought it was never going to happen.

“Today, it is a reality and Nigeria is going from a public sector dominated power sector to a private sector driven power sector. We believe that this is very good for the country, we are celebrating that, the entire nation is agog with it, the international community is amazed that this miracle could happen in Nigeria and we are so happy that everybody sees that it was a fragile situation because no county in Africa has taken the quantum leap to do the entire generation and distribution company utilities like that in one fell swoop.

“Nigeria has done it and I think the government of President Goodluck Jonathan should be commended for the courage, boldness and the dexterity of purpose to have ensured that has happened and it is happening, we thank God.”
- The Punch

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Managing Director, NEXIM, Mr. Robert Orya

The bank would be accessible to grassroots businesses.
The Federal Government on Friday asked the Board of the Nigeria Export-Import Bank (NEXIM) to support Nigeria in maintaining its leading position as the powerhouse in regional trade in West Africa.
The Minister of Finance and Coordinating Minister for the Economy, Ngozi Okonjo-Iweala, said at the inauguration of the reconstituted board of the bank in Abuja that with Nigeria’s economy accounting for about 55 per cent of the regional trade, NEXIM must help build the capacity of private sector entrepreneurs to expand trade in the region and beyond.
The Minister who acknowledged NEXIM as a very important part of government’s finance structure, said the bank, which was set up to support the country’s import and export trade, has so far proven its worth through the performance of its functions and delivering on its mandate.
“There are a lot of expectations from the government, which is embarking on a path of transformation of the economy by working with private sector to expand trade in the country and the West African region and beyond. NEXIM is critical to this process, if Nigeria is going to play its role as the power house within the West African sub-region and Africa,” the minister said.
She said though government was proud of the achievement of the management, a lot was expected from the new board members such as ensuring that NEXIM plays the role it should within the region. She pointed out that there are a lot of entrepreneurs in the private sector that need the services of NEXIM to boost their businesses.
The Minister of State for Finance, Yerima Ngama, who also spoke at the event, hailed the management for turning around the fortune of the bank in the last three years. He said that, prior to their tenure; NEXIM was running at a loss with lots of bad debts as a result of “a very bad credit culture.”
Mr. Ngama said last year was the third time in a row that the bank was posting profit on its balance sheet and declaring dividends to its shareholders; a development that has put the bank on a path of sustained profitability.
He said the management has also taken steps to clean up the balance sheet through the establishment of Debt Recovery Task Force which recovers bad debts and write-off irrecoverable legacy loan. He added that efforts have been made to improve the credit culture through training and enforcement of strict credit evaluation processes. He however asked the board to work towards securing a credit rating that would enable the bank go out and source for funds and increase its capital base.
Mr. Ngama disclosed that in order to bring the mostly city-based bank closer to the grassroots, offices had been set up in Yenagoa, Akure, Ishiagu, Damaturu, Yola, Gusau and Makurdi. in addition to the ones in Abuja, Lagos and Kano.
“A lot of Nigerians involved in various trades as producers of export commodities such as cocoa and palm kernel have no access to credit facilities offered by NEXIM. With the opening of six agencies, NEXIM would be brought closer to the people in all parts of the country,” he said.
According to Mr. Ngama, other achievements of the bank include building international collaboration with institutions like the Islamic Development Bank, which signed a memorandum of understanding (MOU) recently for the promotion of export credit insurance scheme.
The Board is chaired by a Deputy Governor (Economic Policy) of the Central bank of Nigeria, CBN, Sarah Alade, with the Director of Trade and Exchange, CBN, Musa Batari, and Director, Home Finance, Federal Ministry of Finance, Kalli Zaji, as members.
Other members include Director of Trade, Federal Ministry of Industry, Trade and Investment, David Adejuwon; representative of the private export interest, Mohammed Babangida; and NEXIM Managing Director, Robert Orya.

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Nigeria's Minister of Finance, Dr. Ngozi Okonjo-Iweala

The Federal Government has unveiled plans to establish a special finance institution that will attract funds into the economy at lower interest rates.

The Minister of Finance and the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, stated this on Friday in Ilorin during her visit to KAM Industries Nigeria Limited’s multi-billion naira cold steel rolling mill.

She said the bank, which could be established in the next 15 to 18 months, would lend funds to the Bank of Industry, Bank of Agriculture and commercial banks to ensure that interest rates were reduced to a sustainable level for indigenous industries to grow.

Okonjo-Iweala said the government was concerned about the high interest rates being charged by banks and was working to provide an enabling environment that would assist the banks to reduce the rates, especially for indigenous manufacturers and industrialists.

Although she acknowledged the contributions of the banks to the national economy, the minister said the high rate of 20 per cent and above was not favourable for industrial growth.

Okonjo-Iweala said, “We are going to build a development finance institution maybe in the next 15 months to 18 months, a wholesaler that will bring funds and more liquidity into the economy at a lower rate so that it can lend to  the BoI and BoA, other industries and even straight to the commercial banks.

“In the meantime, let our industries not be killed because I have looked at the structure of the economy, it does not warrant 20 per cent interest rate. Government wants the interest rate to come down because we believe that we cannot have sustainable investments at such a high interest rate.

“We are not saying that the banks should not make profits. They are there for profit-making. It must be a commercially viable enterprise but why must they charge 20 per cent? Our inflation has gone from 12 per cent in January this year to 8.7 per cent now, meaning that interest rates, can also go down.”

She also said that the steel sector was critical to the industrialisation of any nation.

The minister noted that in recognition of its importance, President Goodluck Jonathan in January 2012 granted an approval for new and existing industries in the steel sector to import their machineries, equipment, spare parts and raw materials for the establishment of cold roll steel plants at zero per cent duty.

“A 700-tonne capacity per annum cold steel roll mill by Messr. Swesterm Products Company Limited, WAPCO was inaugurated by  President Jonathan early this year and the plant has commenced production and generates 3,000 jobs, Okonjo-Iweala said.”
- The Punch

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