After taking a close look at the new banking regulation which limits the tenure of managing directors to two terms of five years each, Bismark Rewane, chief executive, Financial Derivatives, has described the move as a misplaced assumption.
He questioned the new CBN directive with the argument that governance abuses and substantial malpractices in the banking industry can be dealt with in six months, adding that for this reason, “to expect that limitation of tenure will reduce governance is a misplaced assumption” since there is no substitute for a robust banking supervision process to protect depositors and shareholders.
Meanwhile, the value of cheques cleared in Lagos declined by 18.9 percent in January to N1.03 trillion from N1.27 trillion in December, 2009. Rewane attributed the decline to the CBN policy limiting cheque payment to N10 million. “This could be partly attributed to the effect of the new CBN policy limiting cheque payment to N10 million,” he said.
But the foreign exchange (forex) sold by the apex bank rose by 96.99 percent to $1.7 billion. At the forex auction held last week, a total of $550 million was offered and sold, compared to US$400 million in the previous week. At the foreign exchange auction held on Monday, February 01, 2010, the CBN offered and sold a total of $250 million, compared to the $3150 million it offered and sold in the previous week. On Wednesday, February 03, 2010, the CBN offered and sold a total of $300 million, compared to $250 million it offered and sold in the previous week.
The value of the naira depreciated at the three segments of the foreign exchange market during the week. At the inter-bank market, the value of the naira depreciated by 57 kobo to close at N151.55/$1, compared to the previous week’s figure of N150.98/$1. At the official market, the value of the Naira depreciated by 11 kobo to close at N148.94/$1, compared to the previous week’s figure of N148.83/$1. At the official market, however, the value of the Naira depreciated by 10kobo to close at N152.60/US$1, compared to the previous week’s figure of N152.50/US$1.
As expected, the money market remained relatively liquid during the week, as the unwillingness of Nigerian banks to extend credits to the real sector of the economy persists. The nation’s banks currently prefer investing their funds in secure government instruments at low yields and placements of fund with other banks in order to enjoy the CBN guarantee than lending to the real sector of the economy. Consequently, inter-bank rates closed lower to end the week.
Available data showed that the seven-day Nigerian Inter-Bank Offer Rate (NIBOR) closed the week at 5.71 percent, a 29-basis-point decrease from the previous week’s figure of 6.00 percent. The 90-day NIBOR closed the week at 13.54 percent, a 75-basis-point decrease from the previous week’s figure of 14.29 percent.
There was no activity in the government securities market during week. But for the week ended January 29, 2010, at the 91-day Treasury Bill (TB) auction, a total of N10billion worth of securities was offered and sold. The bill was 584.36 percent subscribed as N58.44billion worth of bid was received. The bill was issued at a discount rate of 3.1985 percent. A total of N15 billion worth of matured bills was repaid into the system, resulting in a net inflow of N5.0 billion from this segment of the market.
Also, at the 182-day TB auction in the previous week, a total of N30billion worth of securities was offered and sold; while it was 356.79 percent subscribed as N107.04 billion worth of bid was received. The bill was issued at a discount rate of 4.73 percent. A total of N10 billion worth of matured bills was repaid into the system, resulting in a net outflow of N20 billion from this segment of the market.
In the previous week, there was a net total outflow of N15 billion from the primary segment of the government securities market.