No doubt, key players in the Nigerian socio-political and economic space are in a race of a lifetime, as the year 2005 gallops near to the tape. With the key issues in contention, the concerned entities must win or be consigned to the history book. Since the Central Bank of Nigeria (CBN) set the consolidation agenda for the banking sub-sector, with December 31, 2005 as deadline, it was always predictable that activities towards achieving the consolidation goal would be a flurry at this time. The surprise is the nature of the storm in the commanding heights of our political economy.
Even for people who had been taunting the Federal Government for action, impeachment and arrest of a sitting Governor is apt reference to the play of forces at that realm. A bonafide case of determined effort at combating corruption is clearly made here, except the abandonment of due process. One of corruptions hydra heads appears smashed, almost with the same fatality with which it assails growth in the economy.
Lately, key developments which align with the FGs set objectives of achieving economic stability and diversifying the economy include:
- Gross Domestic Product (GDP) growth of 6.1 per cent as against the set target of 5 per cent.
- Corporate development in the telecommunication sector recorded investment of $200 million (
N27 billion) by Globacom and MTN.
- The BPE consolidated some transactions in the privatization programme.
However, inflationary pressure in the economy remains strong and pervasive owing to:
- Federal Government expansionary budgetary outlook; drawing from last years excess crude oil revenue reserves.
- Glut in the banking system arising from the newly injected capital yet to be converted to risk assets
- Ineffective strategies at regulating monetary policy variables.
Money market segment of the financial service sector witnessed healthy liquidity in November as statutory allocation for the month of October was released into the market. But the CBNs withdrawal of NNPC funds from the market was a big challenge for some banks. This latter development affected stability of rates in the market. NIBOR 7-day closed at 20.00% from 4.75% at the end of October, while 90-day rate closed at 17.00% from 11.29% for the same period.
The Naira currency appreciated in value against the United States Dollar during the past month. Notably, the Naira gained 43kobo over the dollar between mid-October and November. This is linked to the huge mop up of excess liquidity in the system by the CBN through its various monetary instruments. The regulatory masterstroke that achieved the appreciation in the Naira value worked against stability of rates in the money market. Against the USD, the Naira exchange rate opened at N129.50 and closed at N129.07
Portfolio re-alignment in the Banking sub-sector defined movement of figures at the Nigerian Stock Exchange (NSE) in November. Transaction turnover of 4.02 billion shares worth N36.67 billion in 103,919 deals was recorded last month relative to a total of 2.33 billion shares valued at N25.46 billion in 107,798 deals achieved in (middle of the third quarter) August 2005. In November, transactions were concentrated in the Banking sub-sector. It accounted for 73% of the months total turnover value. The next two months in the market will witness major stock switching, as most investors will acquire more of banks stocks in anticipation of capital appreciation and dividend. So trading activities will remain high in that sub-sector.
As the year draws to a close, the baton of consolidation will pass on from the Banking sub-sector to the Insurance sub-sector. Recently, a consolidation agenda was outlined for the latter. It is expected that with the depth the market has shown regarding the banks consolidation programme, it should be an interesting change even though the process by design will abolish fringe play. However, uncertainty largely pervades the technique of change towards May, 2007.