Financial market experts at the weekend said the interbank market would have lost a total of N400 billion due to the nationwide strike and protest by labour and civil society groups against the removal of fuel subsidy last week.

The interbank market is a short-term market for borrowing among commercial banks to meet their liquidity needs.

A breakdown of the figure, according to a source at the Financial Market Dealers Association (FMDA) showed that the amount of loss suffered at the Nigerian Inter Bank Offered Rate (NIBOR) arm of the interbank market during the five day strike might be about N100 billion. He also put the combined amount that would have been lost at the forex, treasury bills, bonds and commercial paper segments of the interbank market at N300 billion.

Commercial banks and other institutions across the country, and even Lagos State, were shut down throughout last week as a result of the protest and strike by labour and civil society groups over the fuel subsidy removal. This therefore stalled activities at the interbank market.

The source revealed that even though about two banks participated in Open Market Operations (OMO) deals initiated by the Central Bank of Nigeria (CBN), the transaction could not be settled due to the strike.

The Vice Chairman and Chief Executive Officer, Ancoria Investment and Securities Limited, Dr. Olusola Dada, had said the performance of the economy would be greatly hurt by the industrial action.

Dada who spoke in a telephone interview with THISDAY, had urged the federal government to negotiate with labour.

“One would have expected that the president will direct his relevant ministers to go and negotiate with labour. For him to continue to keep silence is not the best for the economy at all. It is not the Senate President that should be negotiating with labour at this time because he does not have the power to implement whatever comes out of the negotiation. We expect the executive to be the one leading on this.

“The current situation implies that the economy is losing heavily. International flights cannot take off or come in, banks other business have been shut since Monday. This is definitely going to negatively affect both domestic and international investments in the country. The impression is that Nigeria is not a stable country,” he had argued.

Forex Transactions
Findings from the CBN website showed that the labour strike did not disrupt forex auction at the bi-weekly regulated market as the two sessions were held last week.

At last Wednesday’s auction at the Wholesale Dutch Auction System (WDAS), the regulator offered a total of $200 million to dealers. However, it did not reveal the number of demand at the auction.  Similarly, at last Monday’s auction the CBN offered a total of $250 million.

Cost of Strike to the Economy
CBN Governor, Mallam Sanusi Lamido Sanusi, last week said  the nationwide strike was costing the economy about N100 billion ($617 million) daily.

Sanusi had also said he expected inflation to rise to between 14 -15 per cent by the middle of this year, up from its current position of 10.5 per cent, due to the impact of subsidy removal.

“Clearly inflation was always going to go up with the removal of subsidy. I think what we’ve seen is the immediate shock impact of a sudden removal and things will settle down.  It took us two to one and half years from 2009 to come down to single-digit from 15.6 percent. I think a realistic target if we actually hit 15 percent, I think we will be looking at end of 2013 before we come back to single-digits,” the CBN Governor had explained.

He had added: “I think it’s time to make a deal, any kind of compromise should have a final deadline for removal of subsidy,” even as he had suggested the option of keeping fuel price at N100 per litre and phasing out subsidies.

Phased Subsidy Removal
Sanusi last week called for an agreement between labour and the federal government that would lead to gradual removal of the subsidy.

The banking sector regulator had made this remark on a television programme. He had also indicated that a short-term reversal to N65 per litre would not hurt the economy.

He had said: “Look, the federal government can continue paying subsidy at N65 per litre for a while. I am not saying that it is not economically possible for that to be done. But speaking as a Nigerian, I will like to see a win-win situation.

“I will like to see a situation in which the government shifts a little and breaks this policy into one or two instalment and I will also like a situation in which Nigerians also shift and understand that we cannot continue to have a Father Christmas kind of situation. If we continue doing this today, our children are going to pay for it.”

The CBN Governor had also said the federal government decision was not taken because the country was broke.

“The country is not broke, but a responsible government does not wait for the country to be broke before it can act and that is the point. Do we wait until we are actually broke before we take the right decision?” he had queried.

Cost of Governance
The CBN Governor last week also called for a restructuring of the country’s constitution in order to drastically reduce the cost of governance in the economy.
Sanusi had maintained that the President did not have the power to reduce the number of ministers in his cabinet, because of the structure of Nigeria’s constitution.

He had described the situation as structural costs that the presidency could not do anything about. “You have a constitution which says you have 36 states and every state must have a minister. The governors have commissioners, they have their aides. You have 774 local governments. First of all, we have to restructure our constitution to reduce cost of governance. Do we need a bi-camera legislature? Do we need 36 states in Nigeria? Are these states viable?

“These are not questions that would be answered by the finance minister, the CBN governor or the president. These are questions that would be answered by Nigerians. I have heard people say they have got 12 ministers in America or elsewhere, the Nigerian president cannot have less than 37 ministers constitutionally. So amend the constitution first!” the CBN governor had argued. 

Fuel Subsidy Removal Date
The Co-ordinating Minister for the Economy (CME) and Minister of Finance, Dr. Ngozi Okonjo-Iweala, last week described the allusion that she had said that the fuel subsidy would stay till April this year as false.

The finance minister also made this remark on a television programme. She had said that the federal government was still open for discussion with labour, even as she had maintained that the subsidy removal was beneficial for the economy. 

Okonjo-Iweala had explained: “This is a very big puzzle to me because the Newspapers Proprietors’ Association of Nigeria (NPAN) town hall meeting were I spoke is on tape. I never mentioned an April date. I did say we were in discussion, but I never mentioned any April date and it is very puzzling to me that people can say this.  We cannot have conversation in a country, where it is based on lies and deceit.

“You know, the Holy Book –the Quran, says we should run away from falsehood because it leads to immorality. We should be honest because honesty leads to goodness. The Bible, in Ephesians 4:25 also says that we should shun falsehood and that we should speak truth to our neighbours. It is fair that in a country which all of us believe in, people would take things and turn it falsehood.”

Mass Transit Scheme
The finance minister last week said the new mass transit scheme that had been inaugurated by the president would alleviate the pains of the fuel subsidy removal.

Okonjo-Iweala had said that private sector operators who were interested in the policy, would be supported at a zero interest rate to get more of such buses. 

According to her, several members of the transport workers’ union had agreed to bring down the fare being charged on transportation.
“We are also working to launch a programme to create 370,000 jobs for our youths each year. So if we can use these resources to get our children out of the house to where they can earn money and help their parents,” she had added.

Electronic Payment
The CBN last week said that it had commenced full implementation of electronic payment system in all private and public organisations. To this end, the banking sector regulator had directed all Deposit Money Banks (DMBs) in the country to dishonour payment instructions with schedules delivered via unsecured methods.

The CBN had given this directive in a circular addressed to all commercial banks.

It had explained: “In its efforts at enhancing the efficiency and security of the payment system in the country, the CBN hereby sets 9th January 2012 as the commencement date for the implementation of end-to end straight through electronic payments of suppliers, all forms of taxes, salaries and pension by both private and public organisations with more than 50 employees/pensioners in Nigeria.

“To this end, all DMBs are to dishonour payment instructions with schedules delivered via unsecured methods such as Flash Drives, Compact Discs or e-0mail attachments with effect from that data. To support this initiative, DMBs are hereby implored to properly educate and advise their customers on the adoption and implementation procedures for an end-to-end e-payment.”

Okonjo-Iweala Denies Property Acquisition
The minister of finance last week debunked an online media report that she had allegedly acquired a N1.2 billion mansion in Maitama, Abuja. She had said that the report was completely false, adding that it had no foundation. Okonjo-Iweala had said that she had no interest in the said property.

“It has been brought to our attention that an online news website (name withheld), has just published a story alleging that the CME and minister of finance have purchased a property worth N1.2billion in Maitama, Abuja. According to the disreputable website, the minister paid for the property in November 2011.

“The story is totally false and without foundation. The minister has no interest of any sort in the property in question. The story also rehashed some previously published and discredited allegations against the minister and her younger brother.  It is simply the latest in a well financed smear campaign against the coordinating minister by persons and groups whose interests are profoundly selfish and anti-Nigeria,” a statement from the ministry had added.

Recurrent Expenditure
Okonjo-Iweala  last week said that the federal government was seriously working towards reducing the high per cent of recurrent expenditure in the system. She had explained that the issue of ghost pensioners and ghost workers were being tackled by the government following the introduction of biometric system.

She had restated that the federal government was also working towards reducing the number of agencies and departments that had duplicating functions, in order to reduce waste in the system.

“Please remember that I came in August 17, 2011, and we did the budget in three months. I was not here last year when there was a salary increase of 53 per cent and increase in the minimum wage, although it is not the minimum wage that is the problem. With a 53 per cent salary increase for everyone, what happened was that it increased the salary bill of the government. The salary increase makes up over 80 per cent of the recurrent cost,” she had added.

Market Records Only One Price Gainer
Only one price gain was recorded at the stock market last Friday as trading at the stock market continued. But the volume of trading improved,  boosted by Diamond Bank Plc, which coincidently was  the only price gainer. Diamond Bank appreciated by N0.03 kobo to close at N2.03 per share.

Conversely, four equities depreciated in value led by First Bank of Nigeria Plc with N0.23 to close at N8.57 per share. Dangote Sugar Refinery Plc went down by N0.19 to close as the second highest price gainer. United Bank for Africa Plc shed N0.10 to close at N2.31, just as Zenith Bank Plc declined by N0.03 to  be at N12.10 per share.

As a result of the higher number of losses, the Nigerian Stock Exchange (NSE) All-share Index fell by 0.21 per cent to close lower at 20,884.97, compared with a gain of 0.02 per cent the previous day. In the same vein, the market capitalisation of equities shed N14 billion to close at N6.567 trillion.

However, investors traded 121.630 million shares valued at N383.727 million in 169 deals compared with  29.364 million shares worth N350.163 million exchanged in 169 deals the previous day.

But Diamond Bank  accounted for about 80 per cent of the transactions for the day, selling 98.479 million shares worth N199.713 million in three deals.

The high patronage of Diamond Bank shares impacted on the banking sub-sector to close the day as the most active. In all, the sub-sector accounted for 108.605 million shares valued at N303.447 million in 115 deals.

A further analysis of the trading last Friday showed it was the day fewer  number of stocks were traded. Only 15 stocks were traded last Friday compared with 24 stocks the previous day.
The strike had affected trading at the stock market as trading took place via remote access.

Some brokers, who spoke with THISDAY last Monday had said that  they could not make it to the  trading floor of the Exchange  in Lagos due to the  strike action.

“In the past we used to make it to the Exchange building and do our transactions. But this time, many of us could not make because the NLC’s directive has made it impossible to make it.  All the contacts I made with the Exchange were via telephone. Even most of the members of staff of the Exchange could not make it to their office as well,” a broker said.

Another operator had said last Thursday that some investors who had been giving  them buy orders with the  hope of an early resolution of the crisis, were holding back their decision   as the strike action had persisted.

Source: ThisDay/Obinna Chima