First Bank Plc

[overload]

Originally Posted by knightofdelta

The PFAs don't have direct access to the pension funds so there is no way they can "loot" them. Before any investment is made or terminated, instructions are sent to the Pension Fund Custodians (PFCs) to move funds or assets from one place to the other.

The Pencom goes through all transactions and asset class, issuer, etc exposure on a monthly basis, with a fine tooth comb, and flag any lapses. There are definitely loopholes that can be used to skim some funds but the era of finding two billion naira in the house of a pension fund managers is over.

but how do we mitigate against wrong bettings? does anyone check what they are betting on with our funds?

[knightofdelta]

Originally Posted by overload

but how do we mitigate against wrong bettings? does anyone check what they are betting on with our funds?

Yes. There is a strict investment guideline that PFAs have to adhere to. This guideline ensure that the funds are diversified across various asset classes. Maximum of 25% can be directly invested in equities and maximum of 80% can be invested in FGN bonds (which is the safest asset in Nigeria). There are also also limits to other asset classes such as private equity, exchange traded funds, Eurobonds, GDR, GDN, etc. This diversification reduce the propensity of unnecessarily taking huge bets with the funds.

If a PFA returns more than or less than 20% above or below the median PFA return on any month, Pencom will take a walk to the PFA to see what they are doing to generate such gains or losses. It is all about the safety of pension assets.

You can check out Pencom.gov.ng to download the latest investment guidelines.

[Salida]

IGP, Mohammed Abubakar, Sues First Bank Over Forgery

[Salida]

Bisi Onasanya: Real Sector Needs to Be Organised to Attract Banks’ Support, Articles | THISDAY LIVE

[Waves]

Originally Posted by Salida

Bisi Onasanya: Real Sector Needs to Be Organised to Attract Banks’ Support, Articles | THISDAY LIVE

"........To the extent that we are still not able to bring inflation rate down, the interest rate regime of the CBN today is still supportive and it is still in order. As a matter of fact, textbook economics would tell you that your interest rate should be above your inflation rate. Today, if the CBN decides to take a factual decision based on available statistics, what they would do is not to bring down interest rate, but to take it up. However, I believe that what should happen is for us to wait and watch the sustainability of the inflation numbers as they come forward. I believe that the numbers would slightly go up higher than it is today, maybe in the first quarter and let’s see what happens in the second quarter. If that pattern emerges and becomes a trend that we can say has come to stay, it would be difficult and dangerous for anybody to propagate that interest rates should come down. We need to understand also that Nigeria traditionally does not have a low interest regime simply because we are not able to control our inflation.

There are efforts today to bring down interest rate, but the efforts should be concentrated first on bringing down inflation before we start talking about bringing down interest rate. I understand the fact that it is desirable for the economy to borrow at low interest rate, but we need to understand that in the context of the Nigerian economy, what is more important today is to make sure that our exchange rate is stable and low enough to sustain the economy. The reason is very simple. We have a very high import component of our cost. So, irrespective of what your interest rate is today, if the exchange rate continues to go up, the impact on inflation will be much higher than we are seeing today. I therefore support the present efforts of the central bank in first of all tackling the exchange rate problem to make sure that we have a stable and sustainable exchange rate. When you do that, the impact is felt on other sectors of the economy including bringing down inflation rate. When inflation rate becomes lower than it is today, it therefore forces the central bank to bring down interest rate. You shouldn’t take interest rate alone in isolation and say you want to bring it down, that would be very academic and can distort the entire system..."

[dr dowell]

Originally Posted by Waves

"........To the extent that we are still not able to bring inflation rate down, the interest rate regime of the CBN today is still supportive and it is still in order. As a matter of fact, textbook economics would tell you that your interest rate should be above your inflation rate. Today, if the CBN decides to take a factual decision based on available statistics, what they would do is not to bring down interest rate, but to take it up. However, I believe that what should happen is for us to wait and watch the sustainability of the inflation numbers as they come forward. I believe that the numbers would slightly go up higher than it is today, maybe in the first quarter and let’s see what happens in the second quarter. If that pattern emerges and becomes a trend that we can say has come to stay, it would be difficult and dangerous for anybody to propagate that interest rates should come down. We need to understand also that Nigeria traditionally does not have a low interest regime simply because we are not able to control our inflation.

There are efforts today to bring down interest rate, but the efforts should be concentrated first on bringing down inflation before we start talking about bringing down interest rate. I understand the fact that it is desirable for the economy to borrow at low interest rate, but we need to understand that in the context of the Nigerian economy, what is more important today is to make sure that our exchange rate is stable and low enough to sustain the economy. The reason is very simple. We have a very high import component of our cost. So, irrespective of what your interest rate is today, if the exchange rate continues to go up, the impact on inflation will be much higher than we are seeing today. I therefore support the present efforts of the central bank in first of all tackling the exchange rate problem to make sure that we have a stable and sustainable exchange rate. When you do that, the impact is felt on other sectors of the economy including bringing down inflation rate. When inflation rate becomes lower than it is today, it therefore forces the central bank to bring down interest rate. You shouldn’t take interest rate alone in isolation and say you want to bring it down, that would be very academic and can distort the entire system..."

Oga mii I disagree with U. My own argument is since it is more than 1 year since central bank has pegged the interest rate at 12% you will agree with me that the impart has not been felt. If u are are going on gear 3 and the car is having problem moving the wise thing to do is change gear. All centra bank is doing is Academic exercise which goes by all things being equal. In this case all thing are not equall. The real world is different from academic world. If the interest rate is low this will reduce interest on loan hence more companies will access loan for expansion and increase productivity which will invariable push down cost. There will be increase in loan to farmers who will produce more and cost will go down. With lower cost this will compete effectively with imported product and hence less import and increase in Excess crude account, which will lead to appreciation. Of the Naira. At this point it will be necessary to point out that NOI is doing a lot at controlling fiscal policy of the Government and with anticipated improvement in infrastructure and the passage of PIB more participant in the petroleum sector leading to less import of petroleum product which will help to further stabilize and if possible push down inflation more.

[goldsun]

Originally Posted by dr dowell

Oga mii I disagree with U. My own argument is since it is more than 1 year since central bank has pegged the interest rate at 12% you will agree with me that the impart has not been felt. If u are are going on gear 3 and the car is having problem moving the wise thing to do is change gear. All centra bank is doing is Academic exercise which goes by all things being equal. In this case all thing are not equall. The real world is different from academic world. If the interest rate is low this will reduce interest on loan hence more companies will access loan for expansion and increase productivity which will invariable push down cost. There will be increase in loan to farmers who will produce more and cost will go down. With lower cost this will compete effectively with imported product and hence less import and increase in Excess crude account, which will lead to appreciation. Of the Naira. At this point it will be necessary to point out that NOI is doing a lot at controlling fiscal policy of the Government and with anticipated improvement in infrastructure and the passage of PIB more participant in the petroleum sector leading to less import of petroleum product which will help to further stabilize and if possible push down inflation more.

i think your comment is more academic. You didn't consider the immediate effect of your policy on exchange rate.

[dr dowell]

Originally Posted by goldsun

i think your comment is more academic. You didn't consider the immediate effect of your policy on exchange rate.

There is nothing Academic about it . Exchange rate is not considered in isolation it is a product of network of a lot of factors which interplay to produce the present exchange rate.

[goldsun]

Originally Posted by dr dowell

There is nothing Academic about it . Exchange rate is not considered in isolation it is a product of network of a lot of factors which interplay to produce the present exchange rate.

if you significantly reduce the interest rate, inflation will be on the rise and the hot money will find its way out of our economy. Its effect on the exchange rate will be difficult to manage. Personally i want interest to come down but i don't think your formula will work

[dr dowell]

Originally Posted by goldsun

if you significantly reduce the interest rate, inflation will be on the rise and the hot money will find its way out of our economy. Its effect on the exchange rate will be difficult to manage. Personally i want interest to come down but i don't think your formula will work

U don't need to reduce it significantly say 10.5% or 10.75% to stimulate the Economy and U will see the wonders it will perform. Remember Global recession is still on and the yield will still be attractive to retain the hot money. The other factors will at the long run push inflation down.

[Waves]

Originally Posted by dr dowell

Oga mii I disagree with U. My own argument is since it is more than 1 year since central bank has pegged the interest rate at 12% you will agree with me that the impart has not been felt. If u are are going on gear 3 and the car is having problem moving the wise thing to do is change gear. All centra bank is doing is Academic exercise which goes by all things being equal. In this case all thing are not equall. The real world is different from academic world. If the interest rate is low this will reduce interest on loan hence more companies will access loan for expansion and increase productivity which will invariable push down cost. There will be increase in loan to farmers who will produce more and cost will go down. With lower cost this will compete effectively with imported product and hence less import and increase in Excess crude account, which will lead to appreciation. Of the Naira. At this point it will be necessary to point out that NOI is doing a lot at controlling fiscal policy of the Government and with anticipated improvement in infrastructure and the passage of PIB more participant in the petroleum sector leading to less import of petroleum product which will help to further stabilize and if possible push down inflation more.

Bisi is a Banker and may not appreciate the economy beyond Infaltion, FX rate and Interest rates. Bear with him.

Originally Posted by goldsun

i think your comment is more academic. You didn't consider the immediate effect of your policy on exchange rate.

The major determinant of our FX rate is crude oil prices.

Originally Posted by goldsun

if you significantly reduce the interest rate, inflation will be on the rise and the hot money will find its way out of our economy. Its effect on the exchange rate will be difficult to manage. Personally i want interest to come down but i don't think your formula will work

In the last two years, the major determinants of Inflation rate are AMCON (N5.4 trillion) and Fuel subsidy removal.

[afolabi27]

Originally Posted by dr dowell

Oga mii I disagree with U. My own argument is since it is more than 1 year since central bank has pegged the interest rate at 12% you will agree with me that the impart has not been felt. If u are are going on gear 3 and the car is having problem moving the wise thing to do is change gear. All centra bank is doing is Academic exercise which goes by all things being equal. In this case all thing are not equall. The real world is different from academic world. If the interest rate is low this will reduce interest on loan hence more companies will access loan for expansion and increase productivity which will invariable push down cost. There will be increase in loan to farmers who will produce more and cost will go down. With lower cost this will compete effectively with imported product and hence less import and increase in Excess crude account, which will lead to appreciation. Of the Naira. At this point it will be necessary to point out that NOI is doing a lot at controlling fiscal policy of the Government and with anticipated improvement in infrastructure and the passage of PIB more participant in the petroleum sector leading to less import of petroleum product which will help to further stabilize and if possible push down inflation more.

You sounded more theoretical than sir Waves in my opinion. It will be more suicidal to allow inflation and a depreciating naira a free reign from a low interest rate, when in actual fact environmental issues remain unsolved.

Bankers are not willing to lend to farmers at currently high rate, why do you project a lower MPR will now direct funds to this class? in the absence of clear changes in environmental issues.

I think 2013 is too early a period to expect a lower MPR if we cannot tame inflation. May be 2014 by the time we begin to see the fruits of the reforms you have mentioned above.

[laso]

Originally Posted by dr dowell

U don't need to reduce it significantly say 10.5% or 10.75% to stimulate the Economy and U will see the wonders it will perform. Remember Global recession is still on and the yield will still be attractive to retain the hot money. The other factors will at the long run push inflation down.

U ar assuming too many things in ur argument which in reality might not b d same. There is no guaratee dat reduction in mpr wil translate to more access to loans 4 pple dat really need money to stimulate d economx(we have been dere b4 & it did not work). There is no quick fix to d nation economy & dat is why i wil view individual opinion as theory. I dont see sls relaxing d monetry tightinen so soon with d fact dat we ar going 2 have an expanded fiscal regime based on d budget passed by d NA($79 per barrel instead of $75 favoured by d executive)

[Waves]

Originally Posted by Salida

Bisi Onasanya: Real Sector Needs to Be Organised to Attract Banks’ Support, Articles | THISDAY LIVE

Originally Posted by Waves

"........To the extent that we are still not able to bring inflation rate down, the interest rate regime of the CBN today is still supportive and it is still in order. As a matter of fact, textbook economics would tell you that your interest rate should be above your inflation rate. Today, if the CBN decides to take a factual decision based on available statistics, what they would do is not to bring down interest rate, but to take it up. However, I believe that what should happen is for us to wait and watch the sustainability of the inflation numbers as they come forward. I believe that the numbers would slightly go up higher than it is today, maybe in the first quarter and let’s see what happens in the second quarter. If that pattern emerges and becomes a trend that we can say has come to stay, it would be difficult and dangerous for anybody to propagate that interest rates should come down. We need to understand also that Nigeria traditionally does not have a low interest regime simply because we are not able to control our inflation.

There are efforts today to bring down interest rate, but the efforts should be concentrated first on bringing down inflation before we start talking about bringing down interest rate. I understand the fact that it is desirable for the economy to borrow at low interest rate, but we need to understand that in the context of the Nigerian economy, what is more important today is to make sure that our exchange rate is stable and low enough to sustain the economy. The reason is very simple. We have a very high import component of our cost. So, irrespective of what your interest rate is today, if the exchange rate continues to go up, the impact on inflation will be much higher than we are seeing today. I therefore support the present efforts of the central bank in first of all tackling the exchange rate problem to make sure that we have a stable and sustainable exchange rate. When you do that, the impact is felt on other sectors of the economy including bringing down inflation rate. When inflation rate becomes lower than it is today, it therefore forces the central bank to bring down interest rate. You shouldn’t take interest rate alone in isolation and say you want to bring it down, that would be very academic and can distort the entire system..."

Originally Posted by afolabi27

You sounded more theoretical than sir Waves in my opinion. It will be more suicidal to allow inflation and a depreciating naira a free reign from a low interest rate, when in actual fact environmental issues remain unsolved.

Bankers are not willing to lend to farmers at currently high rate, why do you project a lower MPR will now direct funds to this class? in the absence of clear changes in environmental issues.

I think 2013 is too early a period to expect a lower MPR if we cannot tame inflation. May be 2014 by the time we begin to see the fruits of the reforms you have mentioned above.

Obviously, you don't realize I only quoted from Bisi's interview in the link. Those are not my views.

[afolabi27]

Originally Posted by Waves

Obviously, you don't realize I only quoted from Bisi's interview in the link. Those are not my views.

Aha, now I understand your "wicked" joke on Bisi! Take Inflation, FX rate and Interest rates out of the economy and tell me what you think you will have left.

Dont dare mention FDI and employment as all these are linked to interest rate and inflation.

[Waves]

Originally Posted by afolabi27

Aha, now I understand your "wicked" joke on Bisi! Take Inflation, FX rate and Interest rates out of the economy and tell me what you think you will have left.

Dont dare mention FDI and employment as all these are linked to interest rate and inflation.

How about Economic Growth and Development. If there is any link between Employment and Inflation, then the best explanation Economist offer is that the relation is inverse. The Phillip Curve theory suggest that if we continue to pursue low inflation, then we will have to live with high unemployment. Bisi, and his ilk like SLS, will not be asked about GDP growth rate and Employment and so can afford to ignore them. FDI follows Economic growth. Only portfolio investment follow interest rate, FX and Inflation.

[dr dowell]

Originally Posted by afolabi27

You sounded more theoretical than sir Waves in my opinion. It will be more suicidal to allow inflation and a depreciating naira a free reign from a low interest rate, when in actual fact environmental issues remain unsolved.

Bankers are not willing to lend to farmers at currently high rate, why do you project a lower MPR will now direct funds to this class? in the absence of clear changes in environmental issues.

I think 2013 is too early a period to expect a lower MPR if we cannot tame inflation. May be 2014 by the time we begin to see the fruits of the reforms you have mentioned above.

Oga I would like to give U thumb up for ur analytical view. I would like to point out that I did not agree with U in a lot of issues that you discussed. My question is how long are U going to support the Naira? I seriously believe in free Economy. The popular statement that what will always find its level is always true.
My second question is why are the banks not lending to Farmers. Don't you think b/cos the Government mop up fund from bank and compete with the private sector in the issues of TB and bonds all traceable to high MPR making it more attractive for banks to buy them and leave the private sector in the cold.
Well the last solution to high interest rate is fixing the infrastructure especially the basic ones like mode of transportation and electricity .
Now the question for all of us to ponder is do we sacrifice the economic growth with the associated. Unemployment and Security challenge until the infrastructure are in place knowing the extend of decay.

[eniyanman]

Originally Posted by dr dowell

Oga mii I disagree with U. My own argument is since it is more than 1 year since central bank has pegged the interest rate at 12% you will agree with me that the impart has not been felt. If u are are going on gear 3 and the car is having problem moving the wise thing to do is change gear. All centra bank is doing is Academic exercise which goes by all things being equal. In this case all thing are not equall. The real world is different from academic world. If the interest rate is low this will reduce interest on loan hence more companies will access loan for expansion and increase productivity which will invariable push down cost. There will be increase in loan to farmers who will produce more and cost will go down. With lower cost this will compete effectively with imported product and hence less import and increase in Excess crude account, which will lead to appreciation. Of the Naira. At this point it will be necessary to point out that NOI is doing a lot at controlling fiscal policy of the Government and with anticipated improvement in infrastructure and the passage of PIB more participant in the petroleum sector leading to less import of petroleum product which will help to further stabilize and if possible push down inflation more.

I agree with you that we really need to start looking at the interest rates. They need to come down. However, we need to look at transmission mechanisms. If MPR is reduced, will the banks reduce lending rates? Perhaps if yields on bills/bonds become 'uneconomic'. Will a lower MPR induce inflation? probably yes. But does it matter if it is brings growth. Developing economies will sometimes have to accept higher inflation as a 'by-product' of economic growth. Provided the inflation is not uncontrolled, it should pose no long term problems. However, this is contigent on growth. Inflation without growth helps no one (same as 'uncontrolled' growth, in which case inflation has to be tamed).
So if we accept a higher inflation figure, how do limit its growth? One way is to limit the impact of imported inflation. We can do this by devaluation (ok, we get short-term inflation). Let the naira take the flax. Make it cheaper to invest in Nigeria. FDI for infrastructural development would be easier to attract. This, in my view, is a more useful tool to build local capacity than the "ban this, ban that" campaign. Devaluation makes our exports cheaper. Local cement production capacity already exceeds demand.
Unfortunately, CBN has decided to introduce a "quasi-currency peg" to the dollar. A peg that is easy to defend with high oil price but impossible to hold when prices tank, hence 'uncontrolled' devaluation as happened in 2008/9. With the flow of "hot money" into our economy, how strong are our "firewalls"? A controlled devaluation 'today' results in a faster build-up of our foreign reserves which in turns increased confidence in the economy (or at least confidence to our ability to repay FDIs). Yes, our reserves are growing but are they growing fast enough?

The impact of subsidy removal or AMCON on inflation should be one-off, in my view. I'm not sure Sir Waves will agree

[eniyanman]

Originally Posted by dr dowell

Oga I would like to give U thumb up for ur analytical view. I would like to point out that I did not agree with U in a lot of issues that you discussed. My question is how long are U going to support the Naira? I seriously believe in free Economy. The popular statement that what will always find its level is always true.
My second question is why are the banks not lending to Farmers. Don't you think b/cos the Government mop up fund from bank and compete with the private sector in the issues of TB and bonds all traceable to high MPR making it more attractive for banks to buy them and leave the private sector in the cold.
Well the last solution to high interest rate is fixing the infrastructure especially the basic ones like mode of transportation and electricity .
Now the question for all of us to ponder is do we sacrifice the economic growth with the associated. Unemployment and Security challenge until the infrastructure are in place knowing the extend of decay.

Well said!

[dr dowell]

Originally Posted by laso

U ar assuming too many things in ur argument which in reality might not b d same. There is no guaratee dat reduction in mpr wil translate to more access to loans 4 pple dat really need money to stimulate d economx(we have been dere b4 & it did not work). There is no quick fix to d nation economy & dat is why i wil view individual opinion as theory. I dont see sls relaxing d monetry tightinen so soon with d fact dat we ar going 2 have an expanded fiscal regime based on d budget passed by d NA($79 per barrel instead of $75 favoured by d executive)

My Oga there is no Economic theory that is not based on assumption including the one SLS is operating with so why wouldn't mine be. My argument against this present high MPR is that it is not producing the desired result and should be change. SLS days are passing . Only time will tell if he will be reappointed . If he like he can keep the interest rate at the present state or increase it even up to may next year . When another person with another ideology come over the tide will change.