Here is an excerpts from the meeting communique:

Central Bank of Nigeria
Communiqué No. 78 of the Monetary Policy Committee Meeting, September 19, 2011

The Monetary Policy Committee (MPC) met on 19 th September, 2011 to review domestic economic conditions during the first eight months of 2011 and the challenges facing the Nigerian economy against the backdrop of developments in the international economic and financial environment in order to reassess the challenges facing monetary policy for the rest of 2011.

On the domestic front, the MPC noted that inflationary pressures faced by the domestic economy had slightly moderated following the series of monetary policy tightening measures adopted by the Bank, complemented by a favourable harvest. The output growth remained robust, although the current security challenges could undermine investors’ confidence and output in the near term. Nonetheless, the inflation outlook appears uncertain despite the expected favorable agricultural production, the stability in expectations engendered by the imminent conclusion of the banking sector reforms, and the prospects for a return to a regime of fiscal prudence in the medium-term following the reconstitution of the Federal Government of Nigeria (FGN) Economic Management Team. It is against this backdrop that the Committee considered the monetary policies required to attain the objectives of price and financial stability in the short to medium term.

Key Domestic Macroeconomic and Financial Developments
Output and Prices
The Committee observed that the output growth rate for the second quarter 2011 remained robust. Provisional data from the National Bureau ofStatistics (NBS) indicated that real Gross Domestic Product (GDP) grew by 7.72 per cent in the second quarter of 2011, which is above the 7.69 per cent recorded in the second quarter of 2010. Overall GDP growth for 2011 is projected at 7.85 per cent which is slightly lower than the 7.87 recorded in 2010. The non-oil sector remained the major driver of growth, recording 8.82 per cent growth rate compared with 1.81 per cent for the oil and gas sector in the second quarter of 2011. The growth drivers remained agriculture, wholesale and retail trade, and services, which contributed 2.48, 1.88 and 2.52 per cent, respectively.

Domestic Prices
The Committee noted that the moderation in inflationary pressures, which commenced towards the end of the second quarter of 2011, continuedintothe third quarter. The year-on-year headline inflation rate decreased from 9.4 per cent in July 2011 to 9.3 per cent in August and core inflation decelerated from 11.5 per cent to 10.9 per cent during the same period. However, food inflation rose to 8.7 per cent inAugust 2011, from 7.9 per cent in July. The harvesting of early maturing crops, especially maize, tomatoes, vegetables, potatoes and fruits playeda key role in the moderation of headline inflation. The recently announced government policies and programmes are likely to have asalutary impact on agricultural output, if speedily implemented. These expectations are however currently under threat from anticipated fiscal injections, increased government borrowing to finance the huge fiscal deficit in the 2011 budget, the recent upward revision of electricity tariffs and the anticipated deregulation of petroleum product prices, among other factors.

Monetary, Credit and Financial Market Developments
Broad money (M2) grew by 8.55 per cent in the eight months to August 2011, which annualized to a growth rate of 12.82 per cent. Aggregate domestic credit (net) grew by 14.72 per cent in August 2011 when compared with the level in December, 2010. On annualized basis, the growth in net domestic credit translated to 22.08 per cent compared with the growth rate of 15.0 per centin the corresponding period of 2010.

The growth in aggregate credit was accounted for by increases in credit to the Federal Government and the private sector. Credit to theFederal Government grew by 18.99 per cent, which annualized to 28.48 per cent, close to the indicative benchmark of 29.29 per cent for2011. Similarly, credit to the private sector grew by 10.88 per cent, which annualized to 16.32 per cent, as against the benchmark of 23.34 per cent. With the banking crisis approaching a final resolution with the recapitalization of banks, it is expected that banks will increaselending once integration issues are concluded. Interest rates in all segments of the interbank money market rose in response to the upward review of the MPR at the previous MPC meeting. The Inter-bank and Open Buy Back (OBB) rates both opened at 7.49 per cent onJuly 27, 2011 and rose to 11.0 per cent and 10.36 per cent on September 15, 2011, respectively. The retail lending rates which hadremained relatively high, however, declined during the period. The average maximum lending rate declined to 22.27 per cent in August, 2011 from 22.42 per cent in July. The weighted average saving rate rose to 1.46 per cent from 1.42 per cent over the same period.The consolidated deposit rate declined during the period from 2.42 to 2.30 per cent. Thus, the spread between the average maximumlending rate and the consolidated deposit rate narrowed marginally from 20.0 per cent to 19.97 per cent during the period.

The bearish performance of the stock market continued during the review period as the All-Share Index (ASI) decreased by 15.5 per cent from 24,980.20 at end-June, 2011 to 21,106.67 on September 16, 2011. Market Capitalization (MC) decreased by 15.7 per cent from N7.99 trillion to N6.73 trillion during the same period. Despite the bearish performance, the equity market was more or less fairly valued as reflected in the NSE Price-Earnings (PE) ratios of 10.82 in August 2011, which was close to the 10-year 8-month median of 11.57. Moreover, the performance of the NSE during the review period is consistent with the performance of other stock markets around the world, and reflects lingering risk aversion and deleveraging on the part of foreign institutional investors who are key players on the NSE.

External Sector Developments
At the wDAS, the exchange rate, during the period (July 27 – September 15, 2011) opened at N150.00/US$ and closed at N153.52/US$, representing a depreciation of N3.52 or 2.35 per cent. At the inter-bank segment, the selling rate opened at N151.80/US$ andclosed at N156.30/US$, representing a depreciation of N4.50 or 2.96 per cent during the period. The exchange rate recorded a modest appreciation at the BDC segment where the selling rate opened at N163.00/US$ and closed at N158.00/US$, representing an appreciation ofN5.00or 3.07 per cent. The appreciation recorded in the BDC segment of the market was attributed to the increased supply of foreignexchange by the CBN and the removal of ceilings on DMBs’ sales to BDCs. The Committee noted that the premium between the rates at the WDAS and the interbank stabilized towards the end of the review period, while that of the BDCs narrowed significantly, suggesting the need to sustain existing measures to improve the efficiency of the market.

The Committee also noted the modest accretion to external reserves during the period. Gross external reserves stood at US$34.85 billion on 15 th September, 2011, representing an increase of US$1.12 billion or 3.32 per cent above the level of US$33.73 billion attained on July 21, 2011. The increase was mainly accounted for by increased inflows of royalties into the federation account, reflecting the upward trend in international oil prices and stable oil production in the Niger Delta. Besides, foreign direct and portfolio investments increased over the last eight months. Foreign capital inflows for the first eight months of 2011 stood at US$5.66 billion which is US$1.06 billion or 23.04 per cent higher than the US$4.60 billion recorded in the corresponding period of 2010.

The Committee’s Considerations
The key concerns noted by the Committee were:
1. Continuing expansionary fiscal stance and high component of recurrent expenditure;
2. Liquidity surge expected from AMCON intervention, following conclusion of bank recapitalization;
3. Sharp rise in month-on-month headline inflation rate despite falling headline inflation rate on year-on-year basis;
4. Need to have positive real interest rates; and
5. Persisting demand pressure in the foreign exchange market, driven by significant liquidity injections and reflecting structural deficiencies that have perpetuated the import dependence of the economy.

The Committee considered that given the difficult and uncertain international environment, it is important to ensure that the current trends in growth are sustained and price stability is maintained. The recent data on inflation showed that the headline inflation rate has been maintained within single digit for two consecutive months. However, concerns remain about sustaining the present inflation trend. The Committee viewed the rise in the monthly headline inflation rate in August which, while justifiable from the point of view of the large household expenditures on account of festivities, was sharp and out of line with the trend in the preceding 11 months. Besides, the anticipated high liquidity in the near future would have a bearing on inflation. The fiscal stance continues to be expansionary. The announcement of a target of one (1) per cent annual reduction in government recurrent spending when viewed in the context of the anticipated injections associated with the implementation of the new national minimum wage, suggests that thefiscal retrenchment is likely to be drawn-out. In addition, there is the weight of structural factors such as the announced hikes in electricity tariffs and the expected removal of petroleum subsidy.

Moreover, the AMCON injection of N3.0 trillion is going to add to liquidity surge with attendant adverse impact on prices. It is forthese reasons that the Committee felt the need for further tightening of monetary policy. On the other hand, the Committee noted that rates have been increased in the last four consecutive MPC meetings and that high lending rates increase the cost of finance for SMEs and this has an adverse consequence for growth and job creation. However, having considered the arguments for and against tightening, the Committee voted for maintaining the stance of tightening in the short term. The Committee emphasized that for monetary policy to be effective it would need to be complemented by other policies, both structural and fiscal. Monetary policy can onlyaddressthe monetary aspects of inflation while fostering growth and financial stability. The need for accelerating fiscal retrenchment and structural adjustment can therefore not be overemphasized.
Decisions:
In the light of the above considerations the Committee decided as follows:
1. A majority of 8 to 3 members voted for a tightening of monetary policy.
2. Seven (7) members voted for a 50 basis-point increase in MPR from 8.75 to 9.25 per cent. One (1) member voted for a 100- basis-point increase in MPR. The 3 remaining members voted to maintain the MPR at the current rate.
3. A Unanimous decision to:
a. maintain the current symmetric corridor of +/-200 basis points around the MPR; and
b. retain the current CRR of 4.0 per cent

You can download the report below:

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).

- Economic expansion to continue and will be buoyed by robust non oil sector growth
- In 2011, the economy has suffered from deferred investment decisions due to political uncertainty
- GDP growth for 2011 expected to be 5.9% before increasing in 2012 to 6.2%
- Expansionary fiscal policy and higher food import prices will pose inflation threats
- Capacity expansion in key sectors to be funded mainly by debt and offshore credit
- Mainly in telecom data network expansion
- Aggressive cement capacity expansion in the building material space now targeting 20million tonnes per year
- Lafarge, Dangote and Flour Mills Nigeria fighting for market share
- Substantial Brewing industry capacity expansion and reactivation of dormant breweries
- Consolidation and growing demand in the Food and beverage sector
- Civil works and engineering for power stations, roads, bridges at both State and FGN levels
- Budget discipline and due process will be on the front burner
- The entry of Ngozi the task mistress means hold the feet of Ministers to the fire
- Deficit funding and management will be a major challenge

You can download the entire presentation below:

BJ Rewane\'s Monthly Economic Views For July 2011 (234).

And here are the top gainers and losers in the stock exchange for July 2011:

And losers:

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).

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)

MPC Decisions
In the light of the above considerations, the Committee is committed to maintaining price stability by pursuing the current policy thrust of monetary tightening in view of the perceived inflation risks in the near term. The Committee took the decision to further tighten monetary policy. This was a decision taken by a majority of 11:1. The following measures were approved:
1. Raise the MPR by 25 basis points from 6.25 per cent to 6.50 per cent with immediate effect (a majority vote of 11:1);
2. Maintain the symmetric corridor of +/- 200 basis points by 7-5; 4 members voted for asymmetric corridor by 50 basis points increase in Standing Deposit Facility rate;
3. Raise the Cash Reserve Requirement (CRR) Ratio by 100 basis points from 1.00 per cent to 2.00 per cent with effect from February 1, 2011 with a majority vote of 11:1; and
4. With effect from March 1, 2011, raise the Liquidity Ratio (LR) by 500 basis points from 25.00 per cent to 30.00 per cent with a majority vote of 11:1.

And you can download the full minutes below.
Communique for MPC Meeting of January 24th-25th 2011 (124)

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)

1. To Retain the Monetary policy Rate (MPR) at 6.25 per cent.
2. To adjust the corridor to +/- 200 basis points, implying Standing Lending Facility (SLF) rate of 8.25 per cent, and Standing Deposit Facility (SDF) rate of 4.25 per cent.
3. Maintain the policy stance of a stable exchange rate.
4. Continue to monitor inflationary trends with a view to taking appropriate steps as and when necessary.
5. On the stance of monetary policy in the year ahead, the Committee reaffirmed that monetary policy would seek to exert pressure on aggregate demand, thereby helping to lower inflation expectations.

The report is below:

Central Bank of Nigeria Communiqué No. 73 of the Monetary Policy Committee Meeting,Nov. 22-23, 2010

The Monetary Policy Committee (MPC) met on 22nd and 23rd November, 2010 to review domestic and international economic and financial conditions in order to reassess the options for monetary policy for the rest of the year and beyond. On the global scene, the Committee noted with concern the continued slowdown in global economic recovery, especially in the US against the backdrop of the huge US trade deficit, requiring both domestic and external rebalancing of demand.

On the domestic front, the MPC noted the high economic growth rate and the progress made towards restoring stability in the banking sector. It, however, observed with concern the continued high inflation rate and reiterated the urgent need for fiscal consolidation and the continuation of comprehensive economic and structural reforms to remove supply-side bottlenecks.

Key Domestic Macroeconomic and Financial Developments
Output and Prices:
The Committee observed the sustained impressive output growth recorded thus far in 2010. Provisional data from the National Bureau of Statistics (NBS) indicates that real Gross Domestic Product (GDP) is estimated to grow by 8.29 per cent in the fourth quarter of 2010, up from 7.86 per cent recorded in the third quarter. Overall GDP growth for 2010 is projected at 7.85 per cent compared with 6.96 per cent recorded in 2009. The non-oil sector remained the main driver of overall growth.

The Committee, however, cautioned that the recent slowdown in economic activity in some major advanced economies could have adverse effects on commodity-producing economies like Nigeria, notwithstanding the expected high crude oil prices in the international markets. While urging greater efforts at diversifying the economy, the Committee stressed the need for policy reforms to address the binding growth constraints on the domestic economy, especially, infrastructural inadequacy. The Committee noted with satisfaction the progress made thus far on the power sector front, but stressed the need for renewed focus on the petroleum and agricultural policy sectors. The continued dependence of the country on imported food and energy, which is totally avoidable, is one of the main sources of erosion of our foreign reserves.

The year-on-year headline inflation (rebased) stood at 13.4 per cent in October 2010 relative to 13.6 per cent in September 2010. Food inflation was 14.1 percent in October, down from 14.6 per cent in September. However, core inflation rose to 13.2 per cent in October from 12.8 per cent in September. The persistence of high inflation remains a major challenge, when viewed against the relatively good harvests, improved supply of petroleum products and weak expansion of credit to the private sector. This reality further underscored the need for addressing supply-side constraints in the medium to long term, and the urgent need to restrain debt-financed government spending in the short term.

The MPC reiterated its earlier position on the threat of inflationary pressure arising from high inflation expectations, calling for stronger fiscal prudence to support the monetary policy stance. This is particularly critical for improving the dynamics of policy coordination. Nevertheless, the Committee would continue to monitor price developments with a view to taking appropriate policy measures to stem any inflation threat and ensure that the upside risk to growth is minimized.

Monetary, Credit and Financial Market Developments:
Provisional data showed that relative to end-December 2009, broad money (M2) grew by 4.25 per cent in October 2010, which, when annualized represented a growth of 5.10 per cent. Reserve money (RM), which stood at N1,653.86 billion at end-December 2009, fluctuated downward and by November 15, 2010, stood at N1,4449.95 billion.

Available data showed that in October 2010, aggregate domestic credit (net) grew by 19.69 per cent over the December 2009 level, and by 23.63 per cent when annualized. Credit to government (net), which grew substantially by 53.35 per cent over end-December 2009 (or 64.02 per cent on annualized basis), was the major source of expansion in aggregate credit. Credit to the private sector, grew marginally by 3.22 per cent (or 3.86 per cent on an annualized basis). In general, the growth in monetary and credit aggregates remained below the long term trends.

The interest rates at the interbank segment of the money market responded to the increase in the Monetary Policy Rate (MPR) effected at the last meeting of the MPC in September in line with policy expectation. Consequently, in October 2010, the average inter-bank call and open-buy-back (OBB) rates rose significantly to 8.45 and 7.53 per cent, respectively, representing increases of 526 and 461 basis points from the 3.19 and 2.92 per cent recorded in the preceding month.

Developments in market interest rates indicated that the retail lending rates were still relatively high. The average maximum lending rate moderated slightly to 21.85 per cent in October from 22.20 per cent in September while the average prime lending rate stabilized at 16.66 per cent.

The weighted average savings deposit rate remained relatively stable while the consolidated deposit rates increased to 2.31 per cent in October from 2.07 percent in September. Thus, the spread between the maximum lending rate and the consolidated deposit rate narrowed marginally to 19.54 per cent in October from 20.14 per cent in September.

The domestic capital market continued to show some signs of recovery. The All-Share Index (ASI) increased from 23,050.59 at end-September to 25,301.34 as at 15th November, 2010, or by 9.8 per cent. Market capitalization (MC) – equities only, increased by 43.1 per cent from N5.65 trillion to N8.08 trillion over the same period. The number of deals increased by 21.6 per cent, while the volume and value of shares traded decreased by 38.5 and 62.7 per cent, respectively. The increase in ASI and MC was principally due to the share price increases in the Banking, Food & Beverage, insurance and Oil/Gas sectors, and new and supplementary listings of shares on the exchange. The Committee believes that the effective take-off of the Asset Management Corporation (AMCON) and progress made on resolution of the banking system crisis have been major contributions to this improvement in sentiment.

External Sector Developments:
The foreign exchange market remained relatively stable. The total foreign exchange inflow in October was US$2.38 billion, representing a decrease of US$0.32 billion or 11.85 per cent below the US$2.70 billion recorded in the preceding month. Total outflows or payments in October amounted to US$3.46 billion, a decrease of US$1.62 billion or 31.89 per cent compared with US$5.08 billion recorded in the preceding month. Consequently, the net outflow during this period was US$1.09 billion.

Inflows from autonomous sources in October were US$10.43 billion compared with US$7.55 billion in September. Cumulatively from January-October 2010, total foreign exchange inflows to the market amounted to US$ 88.32 billion comprising funds from the CBN (US$21.15 billion) and from autonomous sources such as oil companies, international institutions and home remittances (US$67.17 billion). The Committee noted with satisfaction the complementary role of autonomous inflows in moderating demand pressure in the foreign exchange market.

In October, the WDAS average closing rate was N151.25/US$ compared with N151.07/US$ recorded in September, representing a depreciation of 18 Kobo (0.12 per cent). On November 15, 2010, the WDAS exchange rate was N150.29/US$ compared with N151.25/US$ for October, representing an appreciation of 96 kobo (0.64 per cent) At the interbank segment, the average buying and selling rates for October, were N151.68/US$ and N151.78/US$, compared with N152.51/US$ andN152.61/US$ respectively recorded in September, representing an appreciation of 83kobo (or 0.54 percent). On November 15, 2010 the corresponding rates were N150.65/US$ and N150.75/US$ as against N151.68/US$ and N151.78/US$, in October, registering an appreciation of 103 kobo (or 0.68 per cent) .

At the BDC segment, the average buying and selling rates in October wereN151.98/US$ and N153.98/US$ respectively, compared with N152.30/US$ andN153.80/US$ in September. The buying rate represented an appreciation of 32kobo (0.21per cent) while selling rate represented a depreciation of 18 kobo (or0.12 percent). The buying and selling rates on November 15 were N151.50/ US $and N153.50/ US$ compared with N151.98/US$ and N153.98/US$ for October,represented an appreciation of 48 kobo (or 0.31 per cent). Thus, the stability of the naira exchange rate since the first half of 2009 continued into 2010. The MPC believes that the relative stability in the foreign exchange market is likely to be sustained in the near term. The Committee would continue to monitor developments in the market to ensure that measures are taken to eliminate speculative demand and exchange rate volatility.

The gross external reserves stood at US$34.27 billion on 15th November, 2010
compared with US$33.597 billion as at end-October and US$34.59 billion as at
end-September.

The committee noted the elevated demand for foreign exchange at the WDAS which led to an increase in reserve utilization to defend the currency. It also noted recent moderation of demand pressure following Central Bank’s interventions to curtail speculative demand. It, however, stressed that the solution to reserve accretion have to be in implementation of appropriate reforms to industrial and trade policy aimed at reducing import-dependence, and these are beyond the scope of monetary policy.

The Committee’s Considerations
The key concerns noted by the Committee were:

1. The elevated inflation levels;
2. Rising government expenditure and borrowings with the possible crowding out effects on the private sector; and
3. Demand pressure in the foreign exchange market, leading to reduction in external reserves.

The view of the Committee is that the solution requires both fiscal and monetary measures, and reiterated the need to eliminate unnecessary subsidies that add to government expenditure and debt. There is need also for continuing reforms in the economy particularly in the energy and agricultural sectors to curb high import bills through appropriate fiscal policies. The Committee remains conscious of its core mandate and reaffirms its commitment to price stability to engender sustainable economic growth.

The MPC remained committed to exchange rate stability in order to attract foreign direct investment and anchor expectations. The MPC emphasized greater communications with stakeholders to remove speculative demand in the foreign exchange market. It also held that, in view of the low price elasticity of demand for imported necessities, depreciation of the currency would not in itself address the structural problem of import-dependence. The Committee continued to urge greater fiscal responsibility and commitment to reforms that  will enhance the effectiveness of monetary policy.

Overall, members agreed that there is need for tightening, but the discussions centered on the form and the timing of the tightening. After due consideration of the pros and cons of various policy options, the Committee agreed on a majority decision of 6 to 4 members to retain the current policy rate, given the need to retain flexibility and allow the effect of the previous rate increase to work through the system, against the argument for immediate increase in view of the elevated inflation risk. Also, the Committee agreed by a majority of 9 to 1 members to narrow the corridor around the MPR by reintroducing the symmetry of +/- 200 basis points.

Decisions
The MPC’s decisions were therefore:

1. To Retain the Monetary policy Rate (MPR) at 6.25 per cent.
2. To adjust the corridor to +/- 200 basis points, implying Standing Lending Facility (SLF) rate of 8.25 per cent, and Standing Deposit Facility (SDF) rate of 4.25 per cent.
3. Maintain the policy stance of a stable exchange rate.
4. Continue to monitor inflationary trends with a view to taking appropriate steps as and when necessary.
5. On the stance of monetary policy in the year ahead, the Committee reaffirmed that monetary policy would seek to exert pressure on aggregate demand, thereby helping to lower inflation expectations.

In addition, monetary policy would stand ready to provide adequate and timely liquidity to support credit dynamics that would sustain fiscal mechanisms to bolster growth.

Sanusi Lamido Sanusi
Governor,
Central Bank of Nigeria
Abuja
November 23, 2010

You can download the report below:
Communique for MPC Meeting of Nov 22nd -23rd 2010 (70).
DLM Economic Update - MPC Maintains MPR at 6.25% (72)

Fitch Ratings moved toward a possible downgrade of Nigeria’s junk-level ratings, raising concerns about the country pulling money from a crude-oil account the help fund government operations.

That and a continued gradual fall of international reserves at a time of high oil prices and record oil production is a major concern, according to Fitch. It also raises vulnerability to any renewed fall in oil prices and threatens macroeconomic stability.

Fitch director Veronica Kalema said that while there were plans to remedy the situation through the establishment of a sovereign wealth fund and removal of the fuel subsidy currently taken out of the country’s excess crude account, implementing those actions “will be challenging before elections expected in April next year.” The poll has increased short-term political uncertainty, Fitch said.

Other major constraints on the rating — low per capita income, weak transparency and governance and the infrastructure deficit, especially the power shortage — remain in place. Nigeria’s national infrastructure is poor and power generation is grossly inadequate, resulting in low industrial production while offices and homes go for days without electricity.

Fitch revised Nigeria’s outlook to negative.

Fitch did note that Nigeria’s ratings — which stand at BB-, or three notches into junk — are supported by robust non-oil sector growth, and low public and external debt ratios. The recovery in oil production in the fourth quarter last year, and renewed reform momentum this year, also support the ratings.

In August, the nation said gross domestic product grew 7.4% in the first half of the year, building on 5.9% growth the same time in 2009. The enhanced economic development was linked to growth in non-oil sectors and improvement in oil production.

Earlier this month, the International Monetary Fund said the economies of sub-Saharan Africa will be among the best performing in the world this year and next, lagging only behind those in emerging Asia. It raised its growth forecasts for Nigeria’s economy to 7.4% in both 2010 and 2011 from 7% and 7.3%, respectively.

But in the last week, Fitch affirmed it’s long-term investment rating of B+ for Nigeria. Here is the excerpt of that report from Bloomberg:

Standard & Poor’s Ratings Services affirmed its ‘B+’ long-term rating on Nigeria, Africa’s most populous nation and top oil producer, with a stable outlook before a $500 million Eurobond sale next month.

The agency also affirmed its ‘B’ short-term foreign and local currency sovereign credit ratings on the West African nation, it said in a statement today.

“The outlook is stable, reflecting our expectation that Nigeria will maintain its strong external and fiscal balance sheet and that its budgetary performance will gradually improve over the next few years,” it said.

The announcement “will help to allay the concern of potential investors in Nigeria’s Eurobond,” especially after Fitch Ratings cut its outlook on the country to negative from stable on Oct. 22, said Bismarck Rewane, chief executive officer of Financial Derivatives Co. Ltd., a fund manager.

Nigeria plans to appoint bookrunners next week for its first-ever Eurobond sale, planned for mid-December, Abraham Nwankwo, director general of the Debt Management Office, said today.

“The ratings on Nigeria are constrained by high political risk, but supported by a strong balance sheet,” Standard & Poor’s said in the statement.

Elections

The nation of about 150 million people is scheduled to hold general elections in April in which incumbent President Goodluck Jonathan, from the mainly Christian south, has said he will run. Politicians from the predominantly Muslim north say that decision runs counter to an agreement by the ruling People’s Democratic Party to reserve the office for the region until 2015. Jonathan stepped in to the office after the death of former President Umaru Yar’Adua, a northern Muslim, on May 5.

Fitch Ratings lowered its outlook on Nigeria’s BB- rating to “negative” on Oct. 22, concerned about withdrawals from the excess crude account and a drop in foreign currency reserves. The decline in reserves increased the risk to the economy from any renewed drop in oil prices, Fitch said.

Nigeria’s foreign-exchange reserves fell 7.6 percent to $33.9 billion in the month to Oct. 21, according to data on the website of the Central Bank of Nigeria.

Nigeria’s economy, the second-biggest on the continent after South Africa, is expected to grow 7.8 percent in 2010, up from 7 percent last year, driven by non-oil industries such as agriculture, central bank Governor Lamido Sanusi said on Sept. 21.

To get the full details, you can download a copy of their report below. I believe that the report by Fitch is the most detailed analysis and description of the Nigerian economy.
Fitch Ratings For Nigeria 2010 (188)