Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

Unfortunately Buffett isn’t alone.

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.

Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.

So why are these billionaires dumping their shares of U.S. companies?

After all, the stock market is still in the midst of its historic rally. Real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And the unemployment rate seems to have stabilized.

It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.

One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock.

Editor’s Note: Wiedemer Gives Proof for His Dire Predictions in This Shocking Interview.

Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

A columnist at Dow Jones said the book was “one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy that helped avoid the forty percent losses that followed . . .”

The chief investment strategist at Standard & Poor’s said that Wiedemer’s track record “demands our attention.”

And finally, the former CFO of Goldman Sachs said Wiedemer’s “prescience in (his) first book lends credence to the new warnings. This book deserves our attention.”

In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.

Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.

It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.

“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.

“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”

See the Proof: Get the Full Interview by Clicking Here Now.

And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:

“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”

No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.

But Main Street investors don’t have to see their investment and retirement accounts decimated for the second time in five years.

Wiedemer’s video interview also contains a comprehensive blueprint for economic survival that’s really commanding global attention.

Now viewed over 40 million times, it was initially screened for a relatively small, private audience. But the overwhelming amount of feedback from viewers who felt the interview should be widely publicized came with consequences, as various online networks repeatedly shut it down and affiliates refused to house the content.

“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog.

“Our real concern,” DeHoog added, “is the effect even if only half of Wiedemer’s predictions come true.

“That’s a scary thought for sure. But we want the average American to be prepared, and that is why we will continue to push this video to as many outlets as we can. We want the word to spread.”
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Nigeria's Minister of Finance, Dr. Ngozi Okonjo-Iweala

The Federal Government yesterday announced that its $1 billion Eurobond has been over-subscribed by international investors to the tune of 400 per cent, exceeding the expectations of analysts.

According to the Federal Ministry of Finance, the positive response to the bond is anchored on a strong perception that the fundamentals of the Nigerian economy remain strong despite some recent challenges. “This positive reaction is an improvement on investor response to the first bond floated in January 2011.

It is especially significant coming at a time of increasing turbulence and uncertainty in the global market which has witnessed an exodus of investors from other emerging markets”, the Ministry said. Reacting to the development, the Coordinating Minister for the Economy and Minister of Finance, Dr. Mrs Ngozi Okonjo-Iweala, said: “This is very good news for the country.

It shows that the international investors are confident that the Nigerian economy is being well managed and that its future remains bright.” “Investors are not sentimental people. They vote with their pocket. So, if they are responding this way, then it is really significant.

At a challenging time for the global economy like this when investors are running away from other emerging markets, this is a source of encouragement and a vindication for the manner the economy has been managed by the administration of President Goodluck Jonathan”, she said. Maryam Khosrowshahi, who runs sovereign debt origination for Central and Eastern Europe in the Middle East and Africa at Deutsche Bank, in her own reaction said, “It was a bold move.

The transaction went extremely well, which demonstrates that there is still demand and liquidity.” Also reacting, the Director-General of the Debt management Office, Dr. Abraham Nwankwo described the bond as a testament to sound economic management and hard work by the Federal Government.

Meanwhile, yields on Nigeria’s $500 million Eurobonds due January 2021 rose 11 basis points, or 0.11 basis points to 6 percent Monday in London, where they are listed, though they declined 14 basis points to 5.86 per cent yesterday.
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Dr. Nasir Fagge, ASUU President

Once again, the Federal Government’s refusal to honour an agreement it reached with lecturers of public universities has forced the Academic Staff Union of Universities to embark on industrial action on Monday, SEGUN OLUGBILE reports

When the Academic Staff Union of Universities suspended its two-month strike in February 2012, many had thought that the last had been heard of national strikes in public institutions. This optimism was hinged on the Memorandum of Understanding signed by the Federal Government and the lecturers on how to resolve funding challenges, infrastructural decay and welfare problem in the nation’s public universities.

But this is not to be, as the union on Monday stated that it has returned to the trenches to fight government for its alleged refusal to honour an agreement it reached with lecturers. Specifically, ASUU said it has resumed the suspended strike from Monday (yesterday). This action, the union’s National President, Dr. Nasir Fagge, said was taken after the Federal Government allegedly failed to implement the agreement.

Fagge said the action, though painful, would be total, comprehensive and last for as long as the government implements the details of the Memorandum of Understanding that both parties signed in 2011. Consequently, the semester examinations going on in some universities would be disrupted, while admission processes would be put on hold. Final year students writing their projects would be hit hard, as their supervisors would not attend to them. By this, academic activities in public tertiary institutions, particularly in universities and polytechnics, which had been on strike in the last three months, would be paralysed.

The decision to embark on the action was taken during the National Executive Council meeting of ASUU at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State between Sunday and Monday. All the 53 chapters of ASUU were represented at the meeting, during which 51 chapters of the union overwhelmingly voted in support of the action.

Briefing the press about the outcome of the NEC meeting at the University of Lagos on Monday, Fagge said the union decided to suspend the action in January 2012 after the Federal Government and ASUU signed the MoU, which contained how all the issues of funding, pension scheme, retirement age and payment of earned allowance for qualified lecturers would be handled.

The Federal Government, the union stated, had only implemented the extension of the retirement age of professors to 70, but had failed to pay the earned allowance for lecturers who are assigned other duties apart from teaching, research and community service. The earned allowance is the money paid to lecturers who are assigned to administrative duties such as heads of department, hall wardens, student project’s supervision and examination duties and pay for extra workload on lecturers.

Under the student projects’ supervision allowance, a professor is expected to be paid N15, 000 per theses. Also, under the extra workload category, the lecturer/student ratio in Arts, Social Sciences and Education faculties is one lecturer to 50 students, one to 35 in Faculty of Sciences and one lecturer to 25 students in Colleges of Medicine. Lecturers are supposed to be paid if they have more than the national lecturer/student ratio.

“When we signed the MoU, it was stated that N100bn had been set aside to pay the earned allowance. But I can tell you that no lecturer has been paid since 2009. Yes, the government has extended the retirement age of professors to 70 as agreed, earned allowances have not been paid while little has been done to raise the level of infrastructure in universities,” he said.

Although he explained that the union had met with government over the matter many times, government has refused to respect the agreement. Rather, he said, ASUU was told that the government forgot to include the earned allowance in the budget.

The Chairman, ASUU, UNILAG chapter, Dr. Karo Ogbinanka, who had earlier briefed the press about the readiness of his chapter to start the strike after a congress on Monday, explained that the strike was called because government had never shown enough commitment to the development of the sector.

He explained that after the MoU was signed, a NEEDS Assessment Committee on the State of Public Universities was set up to look at the state of infrastructure of the institutions.

“The report has been submitted and all of us know that our universities fall short in physical development, but our concern is government has not done enough to revamp these institutions and the modalities for the injection of funds into these universities have not been followed. That is why there has been increase in the rate of agitation for improved municipal facilities in our universities which has unfortunately been leading to the deaths of innocent students,” Ogbinaka said.

But why is the union embarking on strike when it has not given the government the required ultimatum, Ogbinaka explained that the union had done a warning strike before now.

“Anyway, we don’t even need to give them ultimatum because it is clearly stated in the MoU that we signed with them that we (ASUU) will go on strike without warning should they fail to honour the agreement. They have reneged on the agreement and so there is nothing that can stop us from embarking on this comprehensive and total strike,” he said.

On when UNILAG would join the strike, Ogbinaka said that immediately after the press briefing, a congress would be called and the university management would be informed. “It’s a national strike and UNILAG has joined the action,” he said.

Also the National Treasurer of ASUU, Dr. Ademola Aremu who is also the former Chairman, University of Ibadan chapter of ASUU said the action, being a national one, would be fully supported by lecturers at the premier university. “We are not fighting management of the university, it is the Federal Government that should be blamed for pushing us to the wall to make this painful decision,” Aremu said.

Most of the students our correspondent spoke to on this new development expressed sadness at the action. They called on the Federal Government to honour the agreement by giving their teachers their due. “I’m in the final year, if this crisis is not urgently resolved, it will dislocate my career and that of the other students,” Wale, a student of Political Science at UNILAG said.

But before ASUU finally resorted to go on strike, the House of Representatives had few weeks ago summoned the Minister of Education, Prof. Ruqayyatu Rufa’i and officials of the union with a view to ensuring that the crisis did not degenerate. The duo were invited to meet with members of the House Committee on Education as part of the moves by the legislature to avert the looming strike.

It followed a motion of urgent public importance sponsored by Mr. Bashir Babale (PDP/ Kano) and unanimously endorsed by his colleagues.

Babale said it had become worrisome that university lecturers frequently embark on strikes to compel the government to meet its obligations.

This, he noted, was not good enough as the issues at the root of the crisis were matters that had been agreed upon by both parties.

The lawmaker urged the House to intervene in the crisis and avert the impending strike.

Other lawmakers who contributed to the debate, argued that democracy cannot survive without good education.

They warned that it would be wrong for the government to continue to treat its 2009 agreement with ASUU with levity. But this intervention was fruitless, as government said it had no money to pay the earned allowance.

“We even agreed to sacrifice 20 per cent of the earned allowance but government said it could only pay 50 per cent. We were even shocked when they said they had forgotten to include the money into the budget. So, since 2009 no lecturer has been paid the earned allowance and all of us can testify to the fact that our universities whether old or new are still being underfunded,” Ogbinaka said.

The ASUU officials, however, pleaded with students and parents to bear with the union as they could no longer stand government’s lack of commitment to education.

The last time ASUU embarked on a national strike over the same issue was December 5, 2011. The union was prevailed upon to suspend the strike in February 2012 after the Federal Government signed the now contentious MoU with ASUU with a promise to accede to the lecturers’ requests. President Goodluck Jonathan hurriedly signed into law a bill that sought to extend the retirement age of professors to 70. But after that not much had been done to make the system better than it was in 2009.

Efforts to speak with the minister failed, as a top official in the ministry, who pleaded anonymity, said she was not available for comments.

The source, however said the ministry would comment on the new development on Tuesady (today).
The Punch

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Steve Oronsaye, Nigeria's former Head of Service  

The Nigerian government appears set to scrap at least eight federal agencies, commissions, and parastatals out of about 220 recommended for abolition in the report of the Stephen Oronsaye-led Presidential Committee on the Rationalisation and Restructuring of Federal Government Parastatals, Commissions and Agencies, PREMIUM TIMES has learnt.

As part of the rationalisation, the Economic and Financial Crimes Commission and the Independent Corrupt Practices and Other Related Commission are to be merged into a single entity.

PREMIUM TIMES learnt that a White Paper on the Orosanye-committee report was extensively discussed in at least three meetings of the Executive Council of the Federation, otherwise known as FEC.

As part of the deliberations on the report, a review committee on the draft White Paper, chaired by President Goodluck Jonathan, approved that some agencies be either scrapped completely or merged with those performing similar functions.

PREMIUM TIMES findings reveal eight of those agencies.

The agencies to be scrapped completely include the Bureau of Public Enterprises (BPE); Fiscal Responsibility Commission (FRC); Nigeria Export Promotion Council (NEPC); National Salaries, Incomes and Wages Commission (NSIWC); National Poverty Eradication programme (NAPEP); Utilities Charges Commission (UCC); the National Economic Intelligence Committee (NEIC) and the Public Complaints Commission (PCC).

Affected Agencies

Bureau of Public Enterprises

The BPE was established with the mandate of implementing the Nigerian government policy on privatization and commercialization and preparing public enterprises for privatization and commercialization.

The government has already “directed that a “Sunset Clause” should be introduced to the BPE to conclude its assignment and wound down,” according to the review committee’s conclusion.

This implies that the BPE would wind up once it concludes its assignment of privatization of public enterprises.

Fiscal Responsibility Commission

Another agency that has been recommended to be scrapped is the Fiscal Responsibility Commission, FRC, which was established to help monitor government financial activities and enthrone a regime of prudent, ethical and effective management of public monies and resources by the tiers of government.

Already, the Jonathan-headed review committee has directed the Attorney General and Minister of Justice, Mohammed Adoke, to initiate the necessary actions to give effect to the decision to abolish the FRC.

A third agency that could be scrapped is the Nigerian Export Promotion Council (NEPC) established in 1977 to help minimize the bureaucratic bottlenecks and increase autonomy in dealing with members of the organised private sector to promote the export of Nigerian goods and commodities.

The fourth agency that may be scrapped is the National Salaries, Incomes and Wages Commission (NSIWC), which was established by Act 99 of 1993 charged with the responsibility of managing all issues pertaining to compensation and renumeration in the the public service.

National Poverty Eradication Programme (NAPEP), which the committee said might be scrapped, was conceived in 2001 by the Federal Government to help address poverty in the country and related issues, while the Utilities Charges Commission (UCC) was established to help evaluate trends in tariff charged to provide the government with information relating to the scheduled utilities and their tariff charges.

The other agencies that might be affected include National Economic Intelligence Committee (NEIC), which was established to serve as a vehicle for effective monitoring of the implementation of government’s national economic policies and programmes for the overall development of the country, while the Public Complaints Commission (PCC) was established to help bridge the gap between the elite and the down-trodden in the society.

Under the new arrangement, the NEPC will merge with the Nigerian Investment Promotions Commission (NIPC), which is currently domiciled in the Presidency, while the new organization will relocate to the Federal Ministry of Trade and Investment for effective synergy and utilization of resources.

Similarly, the PCC is to merge with the National Human Rights Commission (NHRC, which is currently performing the PCC functions, while the enabling Act establishing the PCC is to be removed from the Constitution of the Federal Republic through the amendment of sections 153 and 315.

The law establishing the NSIWC is to be repealed to give effect to the transfer of the agency to the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), while the functions of NAPEP are to be merged with the National directorate of Employment (NDE).

Civil servants on the staff of the UCC, which is to be scrapped, have been directed to be redeployed to the Office of the Head of Civil Service of the Federation.

On the other hand, parastatals, commissions and agencies the presidential review committee accepted should be retained include the Code of Conduct Bureau (CCB); Council of States (COS); Federal Character Commission FCC); Federal Civil Service Commission (FCSC); Federal Judicial Service Commission (FJSC); Independent National Electoral Commission (INEC); National Defence Council (NDC); National Economic Council (NEC); National Judicial Council (NJC), National Population Commission (NPC); National Security Council (NSC); Nigeria Police Council (NPC) and the Police Service Commission PSC), whose law is to be amended to make the Minister of Police Affairs its head.

Other agencies and parastatals to be retained include Bureau of Public Procurement (BPP); the Central Bank of Nigeria (CBN); Code of Conduct Tribunal (CCT); Infrastructure Concessionary & Regulatory Commission (ICRC); National Pension Commission (PENCOM); Ministry of Special Duties; National Sports Commission (NSC); National Institute for Sports (NIS); Nigeria Football Federation /Nigeria Football Association (NFA), whose enabling law is to be amended to reflect the directive by the Federation of International Football Association (FIFA) that the organization should be named a federation.

The National Youth Service Corps (NYSC) is to be retained, but with a new structure to reflect a framework to cover critical areas of national socio-economic development that corps members should be deployed for their primary assignments, while the Citizenship and Leadership Training Centre would focus on the promotion of moral values and ethical re-orientation among Nigerians.

The Council for Registered Engineers (COREN) and the Surveyors Registration Council (SRC) are to be retained, although they would henceforth not receive budgetary allocations from government from the 2015 fiscal year, while the Federal Roads Maintenance Agency (FERMA) and the Federal Highway department of the Federal Ministry of Works are to be transformed into an inter-ministerial department after the amendment of their enabling laws.

The Committee also approved the retention of the Office of the Surveyor General of the Federation (OSGOF); National Boundaries Commission (NBC); Border Communities Development Agency (BCDA) which is to be relocated to the Presidency; National Institute of Policy and Strategic Studies (NIPSS); National Emergency Management Agency (NEMA); National Commission for refugees (NCR); Debt Management Office (DMO); Niger Delta Power Holding Company (NDPHC), National Planning Commission (NPC); National Bureau of Statistics (NBS); Centre for Management Development (CMD); National Institute of Social and Economic Research (NISER) and the National Identity Management Commission (NIMC).

The committee also resolved to retain the Nigeria National Merit Award (NNMA); the New Partnership for Africa’s Development (NEPAD); the National Agency for the Control of HIV/AIDS (NACA); Nigerian Christian Pilgrims Commission (NCPC); National Lottery Regulatory Commission (NLRC); National Lottery Trust Fund (NLTF); Service Compact with all Nigerians (SERVICOM), Nigeria Extractive Industries Transparency Initiative (NEITI); National Centre for Women Development (NCWD), and Federal Road Safety Commission (FRSC).

The government had earlier announced that some unproductive research institutes would be scrapped while some others would be merged with relevant research units in universities.
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The lecturers accuse the government of violating an agreement.

Nigerian University lecturers, under the Academic Staff Union of Universities  (ASUU), on Monday began a nationwide indefinite strike.

The ASUU National President, Isa Fagge, told journalists of the development at a news conference via telephone at the University of Lagos.

He said that the decision to have the strike was reached at the National Executive Committee (NEC) meeting of ASUU held at the Olabisi Onabanjo University, Ago Iwoye, on Monday.

Mr. Fagge told journalists that the strike, which takes immediate effect, will be comprehensive, total and indefinite’’. He said that the action was as a result of the inability of the Federal Government to implement some of the issues contained in a 2009 agreement it had with ASUU.

The unionist said that the government had also reneged on the Memorandum of Understanding (MoU) it entered into with the union in December 2011.

“Before now, there has been this issue of the implementation of the key issues contained in the 2009 agreement we entered into with the Federal Government.

“We have had several meetings and deliberations to let government understand why these issues must be resolved but it is like the more we meet and deliberate, the messier the issue gets.

“One of the issues that needed to be addressed was basically that of the Academic earned allowance. This earned allowance, and other issues, had dragged on until government then agreed to write an MOU with the union.

“But as we speak, there has been nothing to show that government was committed to an MOU it also willingly wrote to better the university sector.

“It is in this regard that we are embarking on an indefinite strike,” he said.

Mr. Fagge said that having waited patiently for the government to swing into action to no avail, the NEC of the union decided to meet, deliberate and come up with the action.

Karo Oghenekaro, the Chairman of the University of Lagos chapter of the union, told journalists that government’s penchant for reneging on agreements was not acceptable.

He said that government entered into the MOU with ASUU after the union suspended its strike two and a half years ago.

Mr. Oghenekaro explained that the government had made essential laws on some of the burning issues such as the 70 years retirement age of lecturers as well as the pension commission.

According to him, government, however, is not forthcoming with other pressing demands such as the earned allowance.

He noted that the academic earned allowance was expected to take care of excess work load carried out by the lecturers such as examination officers, deans and supervision of post graduate, masters and other programmes.

“I want to say that not all lecturers are entitled to this allowance, but as we speak, not a single lecturer under the aforementioned categories has received any such allowance.

“What we are demanding as the earned allowance is not more than N12, 500 per person, yet government is saying it cannot afford such.

“Government was actually thinking of the cost implication of everything but after much deliberation, government agreed to sign the MoU and said it had set aside N100 billion to take care of all the burning issues.

“However, government came back to us and pleaded for a reduction and we decided to step the cost down to 80 per cent. That not enough, it also appealed for another reduction to 50 per cent.

“This 50 per cent, government said, will be a one off payment; that it was from that 50 per cent that we shall take care of everything, including the earned allowance.

“This did not go down well with us and so we decided to meet and take the decision we have just taken,” he said.

According to him, the Nigerian tertiary education sector is where it is because of inadequate funding. He said that one of the reasons why there were no foreign scholars in the system was because of the poor wages.

“When we agitate about earned allowance, we are also using it to as a means of attracting foreign scholars so it is not all about our personal interest.

“We are also using it to address the issue of brain drain in the system. As it were, our best brains are all drifting into industries and other sectors that will pay them better, rather than ploughing back into the academic sector.

“To us, it is all about looking at a bigger picture and putting things in the right place,’’ he said.

The union leader said that the decision to embark on the strike was painful but that there was no going back until government took a positive step to address their demands.

The ASUU strike occurs two months after polytechnic lecturers, ASUP, embarked on their own national strike, which is still ongoing.

(NAN)

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The Lagos Chamber of Commerce and Industry, LCCI, has declared that the extreme dependence of government finances and externaltrade balances on proceeds from the sector exposes the nation to significant risks from oil price and production shocks.

The President of LCCI, Mr. Goodie Ibru, said the evolving global energy market dynamics suggest an urgent need to take a sober look at the Nigerian oil and gas sub-sector in particular and the energy sector in general, especially given the importance of the sector to the Nigerian economy.
“Despite the declining contribution to the nation’s Gross Domestic Product (GDP) – currently at 14.7 per cent, the extreme dependence of government finances and external trade balances on proceeds from the sector exposes the nation to significant risks from oil price and production shocks.
“There are profound concerns over dwindling performance of the sector which has been attributed to the structural gaps in its regulatory, fiscal and business practices which have supported highinefficiencies” he said.
Unfortunately, he said, the Petroleum Industry Bill (PIB) which was adjudged the most significant attempt to address these challenges through the reform of the governance and business structure of thesector as well as resolution of fiscal issues is yet to see the light of the day. “From 18.89 per cent in the first quarter of 2009, the year after the PIB was first presented to the national Assembly, oil contribution to GDP has fallen to 14.7 per cent by the first quarter of 2013.
“The international oil market landscape is changing very fast and eroding the competitive value of Nigeria’s oil and gas. “First, the number of countries discovering oil and gas reserves within their national boundaries is increasing; thus expanding the supply base of oil and gas products in the international market.
Also, improvement in refining technology is helping to eradicate the difference between the Nigeria light crude and the other types of crude oil; a feature that reduced the price premium on Nigerian’s bonny light for many years” he said.

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CBN Governor, Sanusi Lamido Sanusi

The total value of offshore investment in Nigeria’s fixed income instruments has been put at about $12 billion.

A breakdown of this figure, according to a report, showed that while about 30 per cent of the funds were invested in the treasury bills market, 15 per cent in FGN bond market, 10 per cent had been staked on open market operations (OMO) bills.

The report however pointed out that most significant position had been taken at the primary market, saying that in order to avoid driving prices down, there would be need for investors to wait for maturity in order to exit.

CSL Stockbrokers, a division of FCMB (UK) Limited stated this in a report titled: “Are Concerns about the Naira Founded?” obtained at the weekend.

It also argued that with average daily liquidity of about $30 million in the equities market, it would take months, if not years, for foreign investors to unwind their positions in the market, even as it declared that to force a devaluation of the naira, will require about 30 per cent fall in oil revenues.

The CSL report added: “Looking ahead, there are redemptions worth $4.3 billion in the third quarter of 2013 – not an impossible sum for the CBN to manage, in our view. A greater cause for concern over the next six months is the level of oil production. While the price of Bonny Light is holding up well at $103.54 versus its year-to-date average of $110.62, there are widespread and often conflicting reports of falling crude production in Nigeria.

“As a rough guide (there are numbers of possible permutations) we think it would take a fall in oil production to 1.7million barrels per day (mbpd) and a near total liquidation of foreign FGN bond and treasury bills holdings over the next three months to force a devaluation of the naira. Under these assumptions, reserves would fall to just below $32 billion.

“A series of events over the past several weeks has contributed to a growing state of unease about the naira. There are reports of waning oil production in Nigeria, there has been volatility in the oil price, and uncertainty about monetary policy in the US has seen a rout in US Treasuries, with knock-on effects to bond markets across the world. While these events have dented market confidence in the naira, we do not think they hail a change in policy.”

According to the report, the anticipated change in leadership at the CBN represents “a tail risk”.

It pointed out that under the present CBN Governor, Mallam Sanusi Lamido Sanusi, the central bank had been clear about its approach to exchange rate management, adding that there had been consistency between its statements and actions.

“Yet with little visibility on potential successors – much less on how they would manage the exchange rate – the possibility of a dramatic shift in policy exists. It is a well-known fact that the Finance Ministry would prefer a freely floating exchange rate; at various times, the International Monetary Fund has also advocated for a liberalisation of the exchange rate regime,” it declared.
Thisdaylive.com

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