1. To tighten monetary policy by a majority decision of 10 to 2.
2. To raise the MPR by 75 basis points from 8.0 per cent to 8.75 per cent by a majority vote of 8 members in its favour, 1 member favoured 50 basispoint increase while 3 members voted for holding the MPR at 8.0 per cent.
3. To maintain the corridor at +/- 200 basis points around the MPR.

Below is the summary from the communique of the meeting:

The Monetary Policy Committee (MPC) met on 25th and 26th July, 2011 to review domestic economic conditions during the first half of 2011 and the challenges facing the Nigerian economy against the backdrop of developments in the international economic and financial environment in order to chart the course of monetary policy in the second half of the year.

On the global scene, the Committee noted with concern the enormity of the challenges being faced by the US and euro zone countries as well as the major emerging market economies such as the fiscal position of Brazil, possible real estate bubbles in China and seemingly intractable inflation in  India, which may impact the Nigerian economy adversely through several channels. The economic slowdown and the commodity price inflation in the international economy as well as the rapid increase in prices of some asset classes in some emerging market economies remain serious threats to the global economic recovery. There are continuing widespread threats of inflationary pressures fuelled by the sustained high energy, commodity and food prices in the global economy. Headline inflation in many of the major emerging market economies is now exceeding 6 per cent and is running close to or above central banks’ targets in a number of other larger economies.

The performance of the global financial markets was mixed. Many national currencies in Africa depreciated against the US dollar while in many emerging markets, currencies appreciated vis-à-vis the US dollar during the first half of 2011. Furthermore, most stock markets around the world showed weak recovery during the period due to high inflation, weakening consumer confidence and government finances, particularly in the US and eurozone. The unfolding debt crises in the European periphery could damage confidence and output in the near-term while the US debt and unemployment situation pose grave danger to the international economy given the reserve currency role of the US dollar and the size of the US economy. It is not unlikely that the US will lose its AAA rating and actual default is possible unless a deal can be worked out between the White house and the Congress.

On the domestic scene, the Committee noted that inflationary pressures which were traceable to the high expenditure levels associated with the April 2011 general elections as well as the effects of rising international energy, commodity and food prices had moderated by June 2011. This development was due in part to the tight monetary policy stance of the Bank since September of 2010. However, the Committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices.

Significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalizing intervened banks to the tune of N1.6 trillion will both add to inflationary pressures. The Committee welcomed the favorable growth projections but cautioned that the current security challenges, infrastructural bottlenecks and the uncertainty in the international economy as well as fiscal developments could undermine investors’ confidence and output growth in the near term.

The Committee expressed serious concerns about the continued sluggish growth of credit to the private sector during the first half of the year which is attributed, among other factors, to the heightened credit risk in the real economy as a result of the persisting structural problems occasioned by the inadequate power supply and critical infrastructure deficit. It also observed that the lending rates of deposit money banks (DMBs) remained relatively high.

You can download the full communique below:

And here is the communique from the June meeting:

Before the July 25th and 26th meeting, Afrinvest, Access Bank, and Vetiva had released preview documents of the Central Bank’s decision, you can read them below:

Monetary Policy Committe Decision Preview - Access Bank - July 25th 2011 (152).

Monetary Policy Committee Communique - Afrinvest - July 26th 2011 (145).

1. Mainstreet Bank Limited has assumed the assets and liabilities of Afribank Nigeria Plc.

2. Keystone Bank Limited has assumed the assets and liabilities of Bank PHB Plc.

3. Enterprise Bank Limited has assumed the assets and liabilities of Spring Bank Plc.

Here is the press release from the NDIC:

LAGOS, Fri, Aug 5 2011
PRESS BRIEFING BY NIGERIA DEPOSIT INSURANCE CORPORATION (NDIC)
RESOLUTION OF FAILING BANKS THROUGH THE ESTABLISHMENT OF BRIDGE BANKS
In July 2009, the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) carried out a special examination of all 24 deposit banks in Nigeria, with the aim of assessing their health, with particular focus on liquidity, capital adequacy, risk management and corporate governance practices.

Ten (10) banks were adjudged to be in grave states with deficiencies in capital adequacy. Of these, eight (8) also had significant deficiencies in liquidity, risk management practices and corporate governance policies. The Managing and Executive Directors of these 8 were immediately replaced, and all the 10 banks were bailed out by the injection of fresh capital totaling about N620 billion, in the form of Tier 2 Capital.

It has been two years since the commencement of the banking reforms and to date, two of the banks (Wema Bank Plc and Unity Bank Plc) have been successfully recapitalized, while four banks (Union Bank of Nigeria Plc, Intercontinental Bank Plc, Finbank Plc and Oceanic Bank International Plc have signed legally-binding Transaction Implementation Agreements (TIAs), a significant step towards recapitalization by the deadline of September 30th set by the CBN.  Equitorial Trust Bank (ETB) Ltd is currently in the final stage of negotiation with a prospective investor with strong likelihood that it will meet the recapitalization deadline.

However, the remaining 3 banks (Afribank Plc, Bank PHB Plc and Spring Bank Plc), have not shown the necessary capacity and ability to recapitalize within the September 30th deadline.

Accordingly, in the interest of depositors and to prevent liquidation which will have dire consequences for depositors and undermine public confidence in the banking system, pursuant to the provisions of the NDIC Act, the Corporation, after due consultation with the CBN and Federal Ministry of Finance and with the full support of the Federal Government, has resolved the problems of the three banks through the Bridge Bank mechanism.

To this effect, the assets and liabilities of the affected banks, whose licenses have now been revoked by the CBN, have been duly transferred by the Corporation to newly incorporated Bridge Banks as follows:
1. Mainstreet Bank Limited has assumed the assets and liabilities of Afribank Nigeria Plc.
2. Keystone Bank Limited has assumed the assets and liabilities of Bank PHB Plc.
3. Enterprise Bank Limited has assumed the assets and liabilities of Spring Bank Plc.

The Corporation is encouraged by the provision of the Bridge Bank option in our law, to resolve the problems in the banking sector.  The Bridge Bank option is a veritable tool of enhancing depositor protection and promoting confidence by ensuring seamless continuity of banking operations. The NDIC will operate the Bridge Banks until such a time that we engage the Asset Management Company of Nigeria (AMCON) with a view to capitalizing the Bridge Banks.  AMCON is expected to open up negotiations with investors who may be interested in capitalizing the Bridge Banks.

With this action, a resolution of the crisis in the Nigerian banking system is assured, as it brings certainty and stability to the banking system. It is worthy of note, that unlike other parts of the world where depositors lost funds in the resolution of banking crises, NO depositor lost any funds in this reform process in Nigeria.

This is indeed in line with the avowed commitment of the Federal Government, and Mr President in particular, to ensure that Nigerian depositors do not suffer the trauma and suffering associated with bank liquidations.

Signed:
Management
NIGERIA DEPOSIT INSURANCE CORPORATION

You can download the press release below:
NDIC Press Release (134)

1. The market moved southwards this week, with a cumulative loss of 197 bps.
2. Incessant selling at the bourse continued with no respite throughout the week, leading to losses across board.
3. The likes of Stanbic IBTC, Intercontinental Bank and Wema Bank however recorded varied gains in the banking sector this week, as the top-tier banks shed varied points. This trend may reverse in the coming week as buyers are likely to key in at the current low prices.
4. In the breweries sector, a last day price appreciation in NB led to a 4.6% gain, while Guinness succumbed to bearish pressure, shedding marginal points.
5. Companies in the food and beverages were not spared from the bearish trend prevalent in the market, as the sector failed to record any gain this week. Thus, Flour Mills, NNFM, Dangote Sugar, Nascon and Cadbury all shed points in excess of 3.0% apiece, while other stocks in the sector remained unchanged.

Stats:

Gainers and Losers:

Results:

And here are the reports:

Afrinvest Weekly Update 15th July 2011 (179).

NSE Weekly Report - Afrinvest - July 15th 2011 (176).

NSE Weekly Report - FSDH - July 15th 2011 (193).

Company Research - Afrinvest - Guaranty Trust Assurance Plc Q1 2011 Result (171).

Company Research - Afrinvest - Guinness Nigeria Plc Q3 2011 Result (211).

Company Research - Afrinvest - Skye Bank Plc Q2 2011 Result (191).

Company Research - Afrinvest - Zenith Bank Plc Q2 2011 Result (205).

Company Research - Cadbury Nigeria PLC - FSDH - July 2011 (228).

Company Research - Cordros - Unilever Plc Q1 2011 Result (216).

Company Research - Flour Mills - FY 2011 Results - Afrinvest (235).

Company Research - FSDH - Guinness Nig. Plc Q3 Mar. 2011 (207).

CONSUMER PRICE INDEX: MAY 2011
(BASE PERIOD NOVEMBER 2009 = 100)
BRIEF METHODOLOGY:

This edition of the Statistical News contains the revised Consumer Price Index (CPI) based on Nigeria Living Standard Survey (NLSS) 2003/2004. The consumption expenditure data were revalued to November 2009 which is the base period for the revised CPI. The May 2003 based and September 1985 based indices are being continued using factors derived from the new CPI. All of these indices will yield the same price change for any commodity group contained in all the series. A new sub index – Imported Food Index- is available in the revised CPI.

A TOTAL of 10534 informants spread across the country provide price data for the compilation of the New CPI each month. Also, 740 product specifications are priced in each centre for computation of the New CPI. For more enquiries relating to the CPI revision refer to kocimo@nigerianstat.gov.ng or kocimo@yahoo.com

ALL ITEMS INDEX
The Composite Consumer Price Index (CPI) rose by 12.4 percent year-on-year in May 2011. This is higher than 11.3 percent recorded in the previous month in the new CPI series. The monthly change of the CPI was 0.91 percent increase when compared with April 2011. The urban All Items monthly index rose by 0.2 percent while the corresponding rural index rose by 1.5 percent when compared with the preceding month.

The year-on-year average consumer price level as at May 2011 for Urban and Rural dwellers rose by 11.5 and 13.0 percent respectively. The percentage change in the average composite CPI for the twelve-month period ending May 2011 over the average of the CPI for the previous twelve-month period was 12.6. This was slightly lower than the figure for the preceding month. The corresponding 12- month average percent change for urban and rural indices rose by 10.2 and 14.5 respectively.

FOOD INDEX
Average monthly food prices declined by 0.3 percent in May 2011 when compared with April 2011 figure. The level of the Composite Food Index was higher than the corresponding level a year ago by 12.2 percent. The average annual rate of rise of the index was 13.2 percent for the twelve-month period ending May 2011. The change in the month-on-month index was caused mainly by downward movement of the prices of some food items like vegetables, fruits and cereals.

ALL ITEMS LESS FARM PRODUCE
The “All items less Farm Produce” index which excludes the prices of agricultural products increased by 0.9 percent in May 2011 when compared with April 2011. The increase was mainly on some household items, building materials, rents, diesel and kerosene. In the twelve-month to May 2011, the index rose by 13.0 percent while the average annual rate of rise of the index was 12.2 percent for the twelve-month period ending May 2011.

The full report for this May 2011 and prior months can be downloaded below:
Nigeria Bureau of Statistics - May 2011 Consumer Price Index (315).
National Bureau of Statistics - Consumer Price Index For April 2011 (221).
National Bureau of Statistics - Inflation Data Feb 2011 (196).
National Bureau of Statistics - Inflation Data - Jan 2011 (189)

June 2011:
LBS Executive Breakfast June 2011 (272).

Prior Months:
LBS Executive Breakfast May 2011 (243).
LBS Executive Breakfast April 2011 - 1 (198).
LBS Executive Breakfast April 2011 - 2 (205).
LBS Executive Breakfast March 2011 (193).
LBS Executive Breakfast February 2011 (192)

Afrinvest 2010 Pharmaceutical & Healthcare Sector Update (459).

Vetiva Research - Cement Sector Study (2587).

An excerpt of their outlook for the different sectors of the economy is below:

Sector Outlook

Banking Sector: Risk gives way, eyes on fundamentals
We are overtly upbeat on 2011 earnings, as the key drags on growth fizzle out. Aside our modest outlook on loan growth which is expected to enliven interest income as well as fee and commission books, the steady uptick in the overall yield environment will provide support for appreciable growth in FY’11 earnings over 2010 levels. Our top calls in the sector are ZENITHBANK, ACCESS and FIRSTBANK. These three banks have an expected return of 27%, 25% and 17% respectively.

Consumer Sector: Tough year ahead…efficiency, requisite
The global factor of rising commodity prices, and constrained domestic credit growth will combine to pose challenges for companies within the consumer sector in 2011. It is worthy to note that these stress points would play differently for the sub-sectors within the Consumer industry. Importantly, the ability of consumer companies to improve and sustain production efficiencies would gird against some of these pressures. In the consumer space, we are bullish on Dangote Flour and Flour Mills on the basis of our expected return of 29% and 11% respectively.

Energy Sector: Elections to slow reforms
With far reaching reforms in the pipeline in of the oil, gas and power segments of the Energy industry, electioneering for the April polls seems to be shifting the focus of the legislators, and also the ability of the executive arm of government to focus on implementation. We note that for most segments, less activity on the reforms would be felt pre-election, whilst the Government is likely to put more focus on the pressing issues in the Energy Industry, post-elections. Our top shot in the sector remains Oando, based on our estimated return of 32%.

Infrastructure Sector: Set for mixed realities
Our focus on the building materials sub sector is on the cement producers, as they dominate the infrastructure sector. The outlook for the cement producers follows from our overall expectations of slow infrastructure development. In line with the additional capacities expected to come on stream this year, the sub sector is set to witness a major boost in cement supply. On consumption, we expect some improvement in Q1’11 given the onset of the dry season. The construction sub sector will still be dependent on government capital expenditure. We expect a reduced level of government contract awards and mobilization as focus on elections stalls decision making in government quarters. Notwithstanding the strong fundamentals of the sector, most of the stocks are stretched at current prices. However, we remain bullish on Lafarge WAPCO and Julius Berger based on our estimated potential return of 18% and 14%.

Insurance Sector: Searching for value
With the Nigerian economy forecast to grow at 7.0% in 2011, and given rising income levels and higher risk awareness among the populace, we are cautiously optimistic about the demand for insurance products. However, intense competition with rate undercutting, moderate returns from investments, and adjustments to the new regulatory guidelines is likely to continue to taper short-term profitability. Our favorite in the Insurance space remains Custodian and Allied Insurance based on our estimated return of 32.1%

Capital Markets: High Expectations Amid Uncertainty
Our expectation is that the equity market will close 2011 18% up, with the benchmark index ending the year at 29,246.49. In our view, this base case scenario would be driven by a 30% return by banks, while Petroleum Marketing and our new Infrastructure (includes building materials and construction companies) sectors are forecast to return 18% and 9% respectively. We expect our new Consumer group to return 15%, however, sub sector forecast puts Food & Beverages at 21%, the Brewers at 12%, while the Conglomerates will throw in a 6% return. As in 2010, we believe the Insurance sector would once again lag the broader market with 2011 return forecast at 5%.

Our Bull case estimate for the equity market performance rises 606 bps above our base case scenario to 24%. Again the banks will lead with a 40% return, Petroleum Marketing and Consumer sectors will follow with 25% and 19% respectively. The Infrastructure sector will post 18% return, while Insurance counters will return 10%.

Our Bear case estimate sees equities returning 10% for the year. This scenario forecasts banks adding 25%, the Petroleum Marketing and Consumer sectors posting gains of 10% and 6% respectively, while the Infrastructure and Insurance sectors will shed 4% and 5% respectively.

Given the expected hyperactivity in local Bond issuances by AMCON and the federal government early in the year, we expect the bond market to continue to attract capital flows as bond yields would trend higher in 2011, hence shaving off, only slightly though, some of the potential investments in equities. Stronger still, the uncertainty in the Nigerian Political environment might delay significant investments in the capital markets further into the year as investors exhibit caution over the outcome of the elections.

Here is an excerpt from the report on their outlook for 2011:

Outlook for 2011
Global Economy
The highlights of the consensus from the IMF, World Bank  and OPEC on the outlook of the world economy for 2011 are:
+ Looking at the world economic growth rate in 2011, IMF projects 4.5%, OPEC projects 3.9% while World Bank projects 3.3%. The  IMF’s projection is slightly lower than the estimated growth rate of 5% in 2010, but represents an upward revision from 4.25% released in the WEO, October 2010. IMF added that signs are increasing that private consumption  – which fell sharply during the crisis – is starting to gain in major advanced economies.
+  IMF however notes that downside risks to the recovery remain elevated. According to the Fund, the most urgent requirements  for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally. These need to be complemented with policies that keep overheating pressures in check and facilitate external rebalancing in key emerging economies.
+ IMF projects oil price around US$90/b in 2011.

The Nigerian Economy
The general elections into various political offices in Nigeria will commence with the National Assembly Elections on April 02, 2011. This will be followed by Presidential Elections on April 09, 2011 and lastly Government/State Assembly Elections on April 16, 2011. Although there are some securities issues around the country which the government has vowed to deal decisively with, we are of the opinion that with the success of the just concluded party primaries across the nation, the election will be void of crisis that can adversely affect the smooth running of the economy and the financial market.
+ There are renewed commitments from the Federal Government to privatize the Power Holding Company of Nigeria (PHCN) by June 2011. This is in line with FSDH Research recommendation. When actualized,  it is capable of thrusting the economy on a growth path never witnessed before.
+ We expect the FGN to adopt more Public Private Partnership (PPP) in its bid to improve the state of infrastructural facilities in the country.
+ We expect the current Sovereign Debt Note  (SDN) where the FGN guarantees the payment of the subsidy to oil importers to end toward  mid-year. This will also be in preparation for the deregulation of the sector.
+ The current high yields on government securities may serve as disincentive for the banks to lend to the real sector of the economy thus further crowding-out the private sector and driving up lending rates.
+ We expect the Bill establishing the Sovereign Wealth Fund (SWF) to be passed and signed into law. If this is established, we expect it to provide additional cushion for the economy and instill more discipline in political office holders in handling public finances. If the average oil price in 2011 stands at US$88/b,  we estimate a total of about US$13.75bn to be saved in the SWF given the production of 2.3m/b and a budget oil price of US$65/b in 2011.
+ Our forecast inflation rate range for 2011 is 12.50% -13.00%.
+ We expect that the FGN, after the general election will have the political will to implement the much desired full deregulation of the downstream sector of the oil and gas industry in Nigeria.
+ Forecast exchange rate for 2011 is the region of  N150.50/US$1-N152.50/US$1. The CBN has also approved forward trading on foreign exchange.
+ With the cleanup of the microfinance subsector of the financial industry, the sector is now well positioned to promote credit creation among the active poor, promoting synergy and mainstreaming of the informal sector in the national financial system and contributing to rural transformation.
+ Our forecast GDP Growth range for Nigeria in 2011 is  7%-8%.  We however believe that Nigeria has the capacity to achieve double digit GDP growth rate if the country has stable power supply, relevant transportation network and  with the proposed deregulation of the downstream sector of oil and gas.
+ External reserve: Our forecast figure to end 2011 is US$35.58bn.
+ Estimating the public debt position of the FGN both from the domestic and external markets from available data and forecast, we expect the domestic debt to increase to N5.11trn, while the external debt should increase to US$5.21bn.

Fixed Income Securities
Considering the interactions of several factors, the following factors may dominate activities in the money market in the next six months:
+ Liquidity tightness
+ Inter-bank rates to maintain upward trends in response to the tightness in the market.
+ We expect further drop in the prices of FGN Bonds in response to rising interest rates, yields and increase in the domestic borrowing of the Federal Government.
+ Treasury Bills may command higher discount rate.
+ Deposit rate may also inch up to attract deposits.
+ Increased activities in the state government bond market after April election, particularly for states where the incumbent governors win the April election. We expect a gradual slow down in the activities in the state government bonds and corporate bonds issuances to close the year.
+ Any new corporate bond will command high coupon rate given the current high yields on FGN Bonds in the market.

Equities Market
FSDH Research believes that the current improved regulatory oversight on the equities market will boost investors’ confidence both locally and internationally. In our view, the following factors will sustain the growth of the market in 2011.
+ Improvement in earnings of quoted companies;
+ Success of the general elections and smooth transition of power;
+ Stability in foreign  exchange rate and other macroeconomic factors;
+ Taking over of non-performing assets of banks by AMCON;
+ Sustained global economic recovery which  will keep oil price around current level  of US$90/b;
+ Signing into law the Petroleum industry Bills;
+ Deregulation of Downstream sector of oil and gas;
+ Adoption of PPP in improving the state of infrastructure in the country;
+ The resolution of the leadership crisis at the NSE;
+ Privatization of PHCN;
+ Commitment on the part of the Federal government to improve power generation and relevant transportation (road and rail).

However the downside risks to the growth of the NSE in 2011 are as follows:
+ Election crisis;
+ The wave of insecurity in the some parts of the country  which may scare foreign investors;
+ Rising yields and rates on fixed income securities;
+ Tightening policy thrust of the MPC;
+ Rising prices of  food and other intermediate raw material in the international market which may reduce the margins of  the companies that rely on them;
+ Delay in AMCON taking over the non-performing assets of banks which may make investors lose confidence in the whole process;
+ Possibility of bubble capital from the  Foreign Portfolio Investment(FPI);
+ The possible adverse impact of the  euro area crisis on the domestic financial market.

We are of the opinion that these factors are to a large extent subdued and the factors in favour of the economy and the financial market outweigh these risks. We are therefore inclined to release a forecast growth rate of 17.42% for the NSE ASI in 2011. Given this growth rate, we expect the NSE ASI to close the year in the region of 29,085.96 points.

FSDH - Economic And Financial Outlook For 2011 (644)

Convocation Lecture - Growth Prospects For The Nigerian Economy - Sanusi - Nov 2010 (165).
Global Financial Meltdown and The Reforms In The Nigerian Banking Sector - Sanusi - Dec 2010 (187)

ECONOMIC REVIEW

The economy continued to record impressive output growth in Q4 2010. Provisional data from the National Bureau of Statistic  (NBS) indicates a real Gross Domestic Product (GDP) growth of 8.29% compared to 7.86% in Q3 2010.  The overall GDP growth for 2010 is estimated at 7.85% compared to 6.96% recorded in 2009.  This also compares favourably with the average growth rate in Africa of 4.5%.  The growth was driven by the Agricultural and Crude Oil sectors, which makes up approximately 42.32% and 19.70% of GDP respectively.  The CBN’s Monetary Policy Committee (MPC) shifted its policy stance from accommodative to monetary tightening.  The benchmark interest remained unchanged at 6.25% but the standing deposit facility rate rose to 4.25% from 3.25%. Consequently, headline inflation fell to its lowest level since the CPI basket was rebased, from 13.40% inOctober to 12.80% in November. We expect the CBN to maintain the current policy in 2011. Similarly, the CBN maintained its stable exchange ratepolicy throughout the year despite the slight pressure witnessed on the demand side in the second half of the year.  As such, the CBN exchangerate (offer) which opened the year at N147.60/$ reached a high of N149.55/ $ and closed the year at N149.17/$.

MARKET REVIEW
The All Share Index (“ASI”) opened the quarter at 23,050.59 closed at 24,770.52 representing an appreciation of 7.46%. For the year in review, the ASI rose by 18.93% as against -33.78% returned in 2009. Similarly, all sectors of the Exchange closed on a positive note with the banking sector recording the highest appreciation (21.93%) for the quarter, while the building material sector recorded the highest appreciation (44.98%) for the year.

Our analysis attributes this change in market trend to the increase in confidence in the market as a result of the announcements from the Asset Management Corporation of Nigeria (“AMCON”), the sanitization of the Nigerian Stock Exchange and strong Q3 performance by majority of the banks. During the quarter, AMCON announced the purchase of all non-performing loans in excess of the 5%. These loans were paid for with 3 year Zero coupon bonds guaranteed by the Federal Government of Nigeria.  Our analysis suggests that this will increase the liquidity of banks and theirability to create risky assets, thereby boosting their profitability further.  In addition, we expect this to significantly reduce the sellingpressure experienced in the equities market due to the overhang of margin loans.   The selection of Mr Oscar Onyeama as the new Director General of the Nigerian Stock Exchange was also announced on the last day of the quarter.

In the fixed income market, the Debt Management Office (“DMO”) raised a total of N282.17 billion via bond issuance which was lower than the N351.46 billion raised in Q3. The DMO reduced the total debt raised in Q4 due to increased crowding out of private sector borrowing by the federal government.  The 3, 5, and 20 years FGN Treasury Bonds opened the quarter at yields of 8.43%, 9.90% and 12.53% respectively and closed higher at yields of 10.82%, 11.42% and 14.24% respectively. In addition, Edo State, Ebonyi State and Flourmills of Nigeria issued 7 year, 5 year and 5 year bonds in N30 billion, N16.5 billion and N35 billion tranches at yields of 14%, 13.50% and 12% respectively. Also the Federation Account Allocation Committee (“FAAC”) disbursed a total of N880 billion during the quarter.

Quarterly Economic Review - Q4 2010 And 2011 Outlook - Stanbic IBTC (152)

• Mixed performance by listed companies
• Declining income and savings
• Absence of margin facilities
• Reduction of bank exposure to margin loans
• Continued banking reforms
• AMCON commenced operations
• GDP growth averaged 7.6% with oil contributing 84% of GDP
• Government revenue was N5,297.18 billion which was 11% below budget requirement
• Inflation was at 12.8% as of Nov 2010
• 93.3billion shares with a value of N797.55billion traded
• Average of 377million shares worth N3.2billion traded daily
• Zenith Bank, First Bank, GTBank, UBA and Access Banks were the most traded
• 2011 growth projected to be 7 – 7.4%
• Big risk of inflation

I encourage you to read it in full. It is loaded with information and statistics.

Growth in the key monetary aggregate accelerated in August 2010 relative to the level in the preceding month. Broad money (M2), rose by 5.3 per cent, relative to the level at the end of the preceding month, due largely to the 1.5 per cent increase in domestic credit (net) of the banking system. Narrow money (M1), also increased, by 9.4 per cent, over the level at the end of the preceding month. Similarly, reserve money (RM), increased by 5.7 per cent over the level at the end of July 2010. Relative to the level at end- December 2009, M2 expanded by 7.0 per cent, owing to the increase in domestic credit (net) and other assets (net) of the banking system.

Available data indicated mixed developments in banks’ deposit and lending rates. The spread between the weighted average term deposit and maximum lending rates widened from 17.72 percentage points in July 2010 to 18.06 percentage points. Also, the margin between the average savings deposit and maximum lending rates widened from 20.65 percentage points in the preceding month to 20.90 percentage points. The weighted average inter-bank call rate fell to 1.26 per cent from 3.59 per cent in the preceding month, reflecting the liquidity condition in the interbank funds market.

The value of money market assets outstanding at end–August 2010 was N3,219.7 billion, representing an increase of 2.6 per cent, in contrast to the decline of 11.6 per cent at end-July 2010. The development was attributed to the 10.2 and 3.1 per cent rise in the value of Commercial Papers (CPs) and FGN Bonds, respectively. Total federally-collected revenue in August 2010 was estimated at N650.59 billion, representing an increase of 11.5 and 54.4 per cent relative to the proportionate monthly budget estimate and the receipts in the corresponding period of 2009, respectively. At N492.49 billion, gross oil receipts, which constituted 79.7 per cent of the total revenue, exceeded the proportionate monthly budget revenue estimate and the receipts in the corresponding period of 2009 by 20.6 and 112.0 per cent, respectively. The increase in oil receipts relative to the proportionate monthly budget estimate was attributed largely to the rise in crude oil production and prices at the international market during the month under review. Non-oil receipts, at N158.10 billion or 24.3 per cent of the total, was 9.5, 5.8 and 0.3 per cent lower than the proportionate monthly budget estimate, receipts in the preceding month and the corresponding month of 2009, respectively. The shortfall relative to the proportionate monthly budget estimate, reflected largely the significant decline in independent revenue of the Federal Government and Value Added Tax (VAT).

Federal Government estimated retained revenue in August 2010 was N214.45 billion, while total estimated expenditure was N321.08 billion. Thus, the fiscal operations of the Federal Government resulted in an estimated deficit of N106.63 billion in the review month, compared with the monthly budgeted deficit of N166.11 billion. The dominant agricultural activities during August 2010 were the cultivation of rice and harvesting of maize, yams and vegetables. In the livestock sub-sector, poultry farmers intensified the clearing and disinfecting of broiler houses as well as their surroundings to minimize the incidence of diseases associated with wet season. Crude oil production, including condensates and natural gas liquids in August 2010 was estimated at 2.12 million barrels per day (mbd) or 65.72 million barrels. Crude oil export was estimated at 1.67 mbd or 51.77 million barrels for the month, while deliveries to the refineries for domestic consumption remained at 0.45 mbd or13.95 million barrels. The average price of Nigeria’s reference crude, the Bonny Light (370 API), estimated at US$77.90 per barrel, increased by1.9 per cent over the level in the preceding month.

The end-period headline inflation rate (year-on-year), in August 2010, was 13.7 per cent, compared with 13.0 per cent recorded at the end of the preceding month. Inflation rate on a twelve-month moving average basis in August 2010 was 13.5 per cent, compared with 13.3 per cent recorded in the preceding month. Foreign exchange inflow and outflow through the CBN in August 2010 were US$2.56 billion and US$3.79 billion, respectively, and resulted in a net outflow of US$1.23 billion. Foreign exchange sales by the CBN to the authorized dealers amounted to US$2.51 billion, showing a decline of 2.7 per cent from the level in the preceding month, but increased by 2.0 per cent over the level in the corresponding period of 2009.

The average Naira exchange rate vis-à-vis the US dollar, depreciated by 0.1 per cent to N150.27 per dollar at the WDAS. Also, at the interbank segment, the Naira depreciated from N150.27 per US dollar in July 2010 to N150.70 per dollar. In the bureaux-de-change segment of the market, the naira, however, appreciated, by 0.03 per cent, to N152.34 per dollar. Non-oil export earnings by Nigerian exporters increased by 3.6 per cent over the level in the preceding month to US$210.1 million. The development was attributed largely to the rise in the prices of all the commodities traded at the international commodities market during the period. World crude oil output in August 2010 was estimated at 86.08 million barrels per day (mbd), while demand was estimated at 85.91 mbd, representing an excess supply of 0.17 mbd, compared with 86.36 and 85.92 mbd supplied and demanded, respectively, in the preceding month. Higher crude oil stock inventory and uncertainties about the pace of economic growth in the Organisation for Economic Cooperation and Development (OECD) countries and most emerging countries accounted for the decline in global crude oil demand.

Also below is the CBN’s Financial Stability Report for June 2010:
CBN - Financial Stability Report - June 2010 (175)