Economic Weekly 02nd April 2013 - Access Bank

VOLUME 3 NO 12 April 02, 2013
Plot 999C Danmole street, Victoria Island Lagos,

VOLUME 3 NO 12 April 02, 2013
CBN Extends Deadline for MFBs, Mortgage Institutions
NEXIM Bank to Execute $60m Regional Sea-link Project.
Update on Commodity Market
Ivory Coast: IMF ups Ivory Coast 2013 growth forecast to 8%
Burundi: Inflation Quickens to Near Double Digits in February
U.K: UK Banks Facing Capital Shortfall of £25 Billion, BoE Says
U.S: U.S. Durable Goods Orders Jump 5.7% amid Surge in Aircraft Demand
China: China and Brazil sign $30bn currency swap agreement
Catch-up effect

VOLUME 3 NO 12 April 02, 2013
CBN Extends Deadline for MFBs,
Mortgage Institutions
The Central Bank of Nigeria extended the deadline for compliance with the revised policy
on regulation and supervisory framework for Microfinance Banks (MFBs) to December
31, 2013. The deadline was initially set at December 31, 2012. The revision allows MFBs
more time to raise capital or decide on the business combination options towards
meeting the capital requirements for each category of MFB. Contained in the revised
framework is capital requirement of N20 million for a unit Microfinance Bank authorized
to operate in only one location. For a State Microfinance Bank authorized to operate in
one State or the Federal Capital Territory (FCT) the capital requirement shall be a
minimum paid-up capital of N100 million while National Microfinance Bank authorized
to operate in more than one State including the FCT will have a minimum paid-up capital
of N2 billion. MFBs are advised to conclude the processes of exercising options to meet
the new capital requirement before the new deadline in order to allow sufficient time for
capital verification and necessary regulatory approvals.

VOLUME 3 NO 12 April 02, 2013
NEXIM Bank to Execute $60m
Regional Sea-link Project.
The Nigerian Export Import (NEXIM) Bank plans to execute a $60 million Regional Sealink
Project for West and Central Africa. The purpose of the Sea-link project is to foster
indigenous participation in the maritime sector. Also, it is expected to help facilitate
intra-regional trade by supporting export diversification and deepening value added to
non-oil exports. The project is expected to become profitable in the third year of
commercial operations. The proposed regional sea-link project has been endorsed by
the ECOWAS Commission with the regional body funding the project's Investors Forum.
The scheme is also to cut across West and Central Africa ameliorating road transport
infrastructure challenges that have slowed African and ECOWAS trade levels by 20%.

VOLUME 3 NO 12 March 25, 2013
Market Analysis
The Stock Market
Performance indicator at the exchange closed on an impressive note for the 4-day
trading period ended March 28, 2013. The last week in Q1 2013 was a bright one for
stocks, supported by increased investor demand as sentiments stayed positive. The
Nigeria Stock Exchange All Share Index (NSE ASI) closed higher by 0.09% at 33,536.24
points while market capitalization gained N11.32billion and finished at N10.73 trillion.
Encouraging financial scorecards released by some blue-chip companies boosted stock
demand and prices. Equities are expected to continue along the upward trajectory on
recent initiatives introduced to sustain interest in the market. The Asset Management
Corporation of Nigeria (AMCON) is set to make some of its shares in banks (for which it
presently manages) available for NSE securities lending. Further upswing is envisaged
this week, as investors opt to lock-in on stocks believed to have strong market
fundamental.
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Source: NSE & Access Economic Intelligence
Source: NSE & Access Economic Intelligence
Chart 3: Stock Market Trend
Source: NSE & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
Market Analysis contd
FGN Securities
Increased activities at various maturity buckets in the bond market saw average bond
yields moderated downwards for the week ended March 28, 2013. The decline in
average yields, more at the shorter tenor instruments was driven mainly by strong
demand for government securities amid a relatively liquid money market. Increased
investors' appetite for government securities as they sought for low risk assets also
supported the observed trend. The Access Bank Government Bond Index recorded a
further uptrend of 0.54% to close the week at 1,847.00 points. We expect this trend to
continue on more robust demand this week, especially at the shorter end of the yield
curve.
Chart 4: Sovereign Bond Yield
Source: NSE & Access Economic Intelligence
NIBOR
Last week, lending rates at the money market declined across maturities on relatively
high liquidity levels. CBN Treasury bill sales of about N216 billion did little to affect
systemic liquidity position. The market opened with about N503 billion, but closed the
week ended March 28, 2013 with a surplus of about N585 billion. Liquidity boosters
from maturing T-bills amounted to N433 billion but systemic ejections came from T-bill
auctions (N90 billion PMA) and wDAS FX purchases (N93.45 billion). Open Buy Back
(OBB) and overnight rates dropped to 10.15% and 10.25% from 10.25% and 10.75%,
in that order. 90-day inter-bank lending rate also pared 0.83 percentage points to
11.50% compared to last week figure. This week, anticipated outflows include about
N50 billion at wDAS and over N100 billion in T-bills Primary Market Auction (PMA). With
the market still relatively liquid and projected inflows of over N240 billion in maturing T-
bills, rates may slightly stay southwards.
Chart 5:NIBOR
Source: FDHL & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
Market Analysis contd
Chart 6:NIBOR Trend
Source: FDHL & Access Economic Intelligence
Average Deposit and
Lending Rates
Average deposit and lending rates remained stable across all tenors for the week ended
March 28, 2013. The stability in rates can be attributed to the relative ease observed in
market liquidity. This week, we do not anticipate any noticeable change in deposit and
lending rates. Consequently, rates are expected to remain broadly unchanged.
Chart 7:Deposit and Lending Rates
Source: FMDA & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
Market Analysis contd
Foreign Exchange Market
As market closure for the Easter Holiday, the Naira strengthened against the US dollar
at the CBN window gaining 1 kobo to close at N155.75/US$. Interbank FX rate lost 35
kobo to finish at N158.55/US$, even though month end dollar sales by oil majors
temporarily helped Naira fortunes during the week. BDC and parallel FX rates did not
change from levels recorded a week earlier. At the bi-weekly auction, the apex bank
sold $576.6 million. This week, the Naira should appreciate in anticipation for more
dollar sales from oil companies.
Chart 8:N/$ Trend
Source: CBN, FMDA & Access Economic Intelligence
Chart 9:Naira Exchange Rates
Source: CBN, FMDA & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
Ivory Coast
IMF ups Ivory Coast 2013 growth forecast to 8%
The International Monetary Fund (IMF) revised upward Ivory Coast economic growth to
8% in 2013 from previous forecast of 7% on signs of improving economic outlook. Years
of political turmoil impeded growth in the French-speaking West African nation. GDP
growth for 2012 was pegged at 9.8% as against previous estimate of 8.6%. Reforms
embarked on by the government, pushing for heavy investment to revamp crumbling
infrastructure boosted optimism. Ivory Coast defaulted on a 2032 Eurobond in early
2011. It has however, resume payment of coupon after receiving over $4 billion in debt
relief under the IMF-World Bank Heavily Indebted Poor Country (HIPC) scheme. Ivory
Coast has since announced plans to issue $1.2 billion worth of domestic debt in 2013.

VOLUME 3 NO 12 April 02, 2013
Update on Commodity Market
Most commodity prices traded up for the week ended March 28, 2013. Crude oil prices
closed at $106.60 per barrel, gaining 0.86% while natural gas prices rose by 1.66% to
close at $4.05 per million british thermal units (mbtu) due to increased demand. The
increase in oil prices was largely driven by higher demand for heating oil, while rising
crude oil stockpiles in the U.S. and stronger dollar limited gains. Gold and silver prices
added 0.92% and 0.10% to finish at $1,605.85 per ounce and $28.64, respectively. The
recent news on Cyprus bailout plan, which is unlikely to satisfy EU and IMF officials may
have contributed to the rally of safe haven investments and also dragged down the Euro.
This week, the ongoing bearish sentiment towards the Euro may continue. This may
likely boost the appeal for the precious metal as a store of value. Crude oil prices may
further trend northward on increasing demand – winter effect.

VOLUME 3 NO 12 April 02, 2013
U.K
UK Banks Facing Capital Shortfall of £25 Billion, BoE Says
In the United Kingdom, lenders will have to raise £25 billion in extra capital by end-2013
to absorb potential loss from exposure to high-risk loan portfolios, a report released by
the Bank of England (BoE) show. The capital deficit is a child of growing exposure of UK
Banks to the sovereign debt crisis in the Eurozone, the property market and other
financial risks. Growth in Europe's third largest economy was revised downward to 0.6%
in 2013 from previously estimated 1.2%, due to lingering sovereign debt crisis in the
euro area – the country's main export destination. The outlook for 2014 was also
lowered to 1.8% from 2%. Meanwhile, growth is seen expanding 2.3% in 2015, 2.7% in
2016 and 2.8% in 2017, in that order.
U.S
U.S
U.S. Durable Goods Orders Jump 5.7% amid Surge in Aircraft Demand
New orders for manufactured durable goods in U.S. rose to 5.7% in February 2013 from
a 3.8% decline recorded in the previous month. The bigger than expected increase in
durable goods orders was largely due to a 21.7% jump in orders for transportation
equipment. This comes on the heels of a 17.8% drop in January. Also, orders for
commercial aircraft and parts soared by 95.3% after falling 24% the month before. The
encouraging data from the manufacturing sector is a boost to the slow U.S economic
growth and may quicken the pace of global recovery. The U.S. economy is projected to
expand by 2% in 2013. The world's largest economy contributed about 22% to world
output in 2012.
China
China and Brazil sign $30bn currency swap agreement
China and Brazil have signed a currency swap deal to ensure smooth bilateral trade and
guard against upshot of future global financial crises. The pact allows the central banks
of both economies to swap local currencies worth of $30 billion (190 billion Yuan or 60
billion Reals). Aside being the world's second-largest economy, Beijing is also Brasília
biggest trading partner. Trade relations between economies (China & Brazil) have grown
robustly over the past few years, with volumes rising to about $75 billion in 2012 from
$6.7 billion recorded in 2003. It is hoped that, the swap agreement would ensure
increasing trade volumes between nations is sustained, even as financial crisis in the
future hurt global liquidity.

VOLUME 3 NO 12 April 02, 2013
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Chart 10: External Reserves & Crude Oil (Bonny Light) Price
Source: CBN, EIA & Access Economic Intelligence
Chart 11:Average NIBOR
Source: FDHL& Access Economic Intelligence
Chart 12:Average Deposit Rates
Source: FDHL & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
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Chart 13:Average Prime Lending Rate
Source: FDHL & Access Economic Intelligence
Chart 14: Trends in MPR, Inflation and NIBOR Call
Source: NBS & Access Economic Intelligence
Chart 15: GDP Growth Rate
Source: NBS & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
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Chart 16: Inflation Rate
Source: NBS & Access Economic Intelligence

VOLUME 3 NO 12 April 02, 2013
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Catch-up effect
In financial economics, the term “catch-up-effect” explains states that poorer
economies' per capita incomes will tend to grow faster than richer
economies. As a result, the national income of poor countries usually
catches up with that of rich nations. Developing countries have the potential
to grow at a faster rate than developed countries as return on capital is
usually stronger in poor countries. Increasing the amount of capital by only a
small amount can produce huge gains in productivity. Furthermore, new
technology may even allow developing countries to leap-frog over
industrialised countries with older technology. This, at least, is the traditional
economic theory.