Gabriel Omoh, in Washington and Babajide Komolafe
15 October 2008
A struggle has broken out among banks over appointment as market maker for the stock market even as indications emerged yesterday that the Nigerian Stock Exchange (NSE) may have approved five banks for the deal.
Meanwhile, the Managing Director of the World Bank, Dr. Ngozi Okonjo-Iweala, has said the ongoing global financial crisis will not have an immediate impact on Nigeria or the African banking system while interbank interest rate has risen to 16 per cent, reflecting an increasing liquidity squeeze in the interbank money market in Nigeria.
Already, stock markets across the globe rose strongly for the second consecutive day in Europe and Asia yesterday.
The struggle among the banks broke out following indications that the NSE had approved First Bank, Union Bank, Intercontinental Bank, Zenith Bank and UBA to be market makers.
It was gathered that the text message originated from some of the banks that also applied to be included in the market maker arrangement but had their application turned down.
It was gathered that the five banks were actually chosen because they were considered to be the most liquid banks.
As market makers, the five banks are to provide demand in the market. What is happening now is that there is excess of supply of stocks in the market hence the five banks would provide the demand to meet the supply and thereby stabilise the market. Besides, when there is excess demand for stocks in the market, the banks would supply the stocks to meet the demand. Contrary to speculations, it was gathered that no specific amount of money is involved.
No Financial in African banks -Okonjo-Iweala
Meanwhile, Managing Director of the World Bank, Dr. Okonjo-Iweala, said in Washington on Monday that the financial crisis currently rocking the global economy would not have an immediate impact on Nigeria and African banking system as the reforms carried out in the continent and the fact that ownership of Nigeria banks is not foreign have helped to limit its impact.
She said at the board of the World Bank, "there is going to be an extra seat for African countries, which means that Africa's voice will be heard even more than before since it now has a third chair on the board.
I think this is a major positive piece of progress by the World Bank and it has received the blessing of the development committee which gives Africa countries more say and I think we should commend the work that has been done by Africa Board of Governors, Board of the World Bank and Mr. Robert Zoellick, President of the bank in trying to get this through.
"In terms of the present financial crisis, the key question is: how will this impact on Africa? What sort of impact is it going to have? The first thing to say is, of course, the effect of the crises is still working themselves out here in the US, in Europe and elsewhere and so it will take sometime before we see the full impact of that even within the countries that are the epic centre of the crisis and then to see what will happen to Africa countries. But one can look at one or two channels where African countries might be impacted.
"I think the first thing is to also remember that before this financial crisis, there have been the food, fuel and fertiliser crises. The crisis is not being seen in Africa banking system and countries for now.
Those countries that have high micro-economic imbalances, those with high current and capital account deficient are the ones that are going to be very careful to take adequate measures because if anything happens they are the ones that will experience greater volatility.
"Another is the volume of assistance, and as you saw from the communique of the development committee and from the discussion, there has been a lot said about developed countries maintaining their commitment in Greaniggles to make sure that their pledge does not diminish. As of now they are trailing behind, I think their pledge is that by 2010, $50 billion will be going to Africa but how do they meet up with this commitment? I think we are at about $38billion. There is the need for them to keep the pressure on to make sure those aid commitments are met.
"This may be a bit difficult since they themselves are experiencing a squeeze due to this crisis. Certainly there has been great effort to urge them to keep their eye on the board. African countries need to do their own bit. You know we also need to make our own effort to continue the reforms.
You know that one of the good thing, the reason why Africa countries might not suffer much from this crisis as they could have is because they have been reforming.
Interbank interest rate hits 16%
Interbank interest rate which went down by about 50 per cent last month has risen to about 16 per cent in the Nigerian interbank money market. Investigation revealed that overnight cost which fell to 9.5 per cent last month when the Central Bank (CBN) announced measures to boost liquidity in the banking industry, has risen to about 16 per cent as at yesterday, while interest rate on OBB lending which fell to 6.5 five per cent had risen to 9.5 per cent. This, according to money market sources, was caused by scarcity of funds which reemerged in the market two weeks ago.
Stock Markets rebound
Stock markets in Europe and Asia rose strongly for a second straight day, yesterday, after US stocks rallied from its worst week ever on mounting evidence that government attempts to shore up the world's battered financial system are beginning to thaw frozen credit markets.
The gains on Europe's markets came in the wake of the strongest ever daily performance on Japan's benchmark Nikkei 225 index, which surged 1,171.14 points, or 14.15 percent, to close at 9,447.57. Tokyo financial markets were playing catch-up to recent developments because they were closed Monday for a holiday.
In London, the FTSE 100 index of leading shares was up 255.08 points, or 6.0 percent, at 4,511.98, despite news that inflation in Britain is running at a 16-year high. Germany's DAX was up 257.46, or 5.1 percent, at 5,319.91 even though a group of leading German economic think tanks said Tuesday that Europe's largest economy is on the "brink of a recession."
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