* Naira gains 44k in interbank

By Babajide Komolafe
The Central Bank of Nigeria (CBN) has extended the deadline for Wema Bank and Unity Bank to recapitalise by three months  till September.

naira sign

It would be recalled that the two banks were given till June 30th 2010 to recapitalise following the special audit of banks by the apex bank last year which revealed that the two banks had insufficient capital base.

Announcing  the extension yesterday in a  a press statement signed by the Deputy Director, Corporate Affairs, CBN, Ahaji M.M Abdullahi, the apex bank said, “Our attention has been drawn to Newspaper reports expressing concern on the deadline of June 30, 2010 given to Unity Bank Plc and Wema Bank Plc to recapitalize. We wish to inform the general public that due to unanticipated three months extension in timeline for setting up Asset Management Corporation of Nigeria (AMCON), the Central Bank of Nigeria has granted a three months extension for the two banks to recapitalize.

The Central Bank of Nigeria is fully abreast of the significant progress made by the boards of the two banks on their recapitalization and is satisfied with the efforts. It is our hope that with the progress made so far, the two banks should be recapitalized by the end of September 2010 through the combination of sale of toxic assets to AMCON and injection of fresh capital.”

Meanwhile,  the naira appreciated by 44 kobo in the interbank foreign exchange market, the biggest in gain for the currency in June.

The interbank foreign exchange rate yesterday fell to N150.75 from N151.19 per dollar. Vanguard investigation reveal that the interbank market is liquid  with dollars owing to the $392 million supply from major oil firms last week including Nigeria National Petroleum Corporation (NNPC).

The naira is expected to remain relatively stable this week following further decline in foreign exchange demand in the official segment of the market. This in addition to the $550 million supplied by the apex bank last week, which was more than the $530.662 million demanded at the official foreign exchange market occasioned  low demand for foreign exchange in the interbank foreign exchange market. It would be recalled that last week the naira gained 12 kobo at the official market and 34.25 kobo at the interbank market.

On the international scene, the euro fell against the dollar and almost all of its other major counterparts after a U.S. report showed inflation remains muted and Group of 20 nations leaders agreed on a target for cutting budget deficits.

The Dollar Index advanced, recovering from an earlier loss that took it almost to a six-week low, as 10-year Treasury notes rallied and pushed yields to the least in more than a year.

Advanced economies among nations meeting in Toronto over the weekend agreed to halve deficits by 2013 while providing stimulus to support economic recovery. Spanish and Italian bonds dropped.  The euro declined 0.2 percent to 110.17 yen at 11:09 a.m. in New York, from 110.41 on June 25.

Meanwhile Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), on Monday  welcomed the actions of the Group of 20 nations in Toronto, Canada, to sustain the global economic recovery and lay the basis for strong, sustainable and balanced growth.

He particularly noted the Leaders’ resolve to cooperate-in a multilateral context-to encourage economic growth, promote job creation, and enhance global prosperity. He stated, “I am encouraged by the conclusions of the G-20 Summit, including the active engagement of the Leaders in developing the G-20 Framework for Strong, Sustainable and Balanced Growth.”

The G-20 Leaders agreed in Toronto to develop a comprehensive action plan to be finalized at the Seoul Summit. “This initiative holds out great promise. “IMF analysis in support of the G_20 Mutual Assessment Process shows that appropriate collective action could increase global GDP by 2.5 percent over the medium term, creating tens of millions of jobs, lifting tens of millions more out of poverty,” Mr. Strauss-Kahn said.

Mr. Strauss-Kahn noted that more robust growth is needed both to reduce unemployment and to lessen the burden of large public debts.

“The G-20 Mutual Assessment Process is the mechanism through which the growth challenge can be addressed. It points to three areas for action. First, fiscal coutting in place now credible fiscal plans, mostly starting in 2011, since the recovery is still fragile. Second, economies with surpluses need to boost internal demand, for example by spending on social safety nets, improving infrastructure, and allowing exchange rate flexibility.

And third, structural reforms, especially in the advanced economies-encompassing changes in goods and labor markets that will lift growth, and financial reform that will make it sustainable.”

Mr. Strauss-Kahn noted that the Toronto Summit had made progress toward a comprehensive set of new standards to enhance the strength and stability of the financial sector. “I am heartened by the renewed commitment by G-20 Leaders to implement the financial sector reforms agreed to in London and Pittsburgh. A healthier and safer financial sector will supply the credit needed to finance recovery and serve the needs of the real economy. I am also encouraged that Leaders agreed on principles that will guide the design of measures to ensure financial institutions pay a fair and substantial contribution towards burdens associated with government interventions to repair the financial system or fund resolution.”

Lastly, the Managing Director welcomed the G-20’s support of the IMF, including the commitment to accelerate work in order to complete IMF quota reforms by the Seoul Summit in November, and to deliver in parallel on other governance reforms, in line with the Pittsburgh Summit commitments. “Today’s commitments will bolster IMF legitimacy and credibility.

Much remains to be done until Seoul. Commitments to ratify the 2008 Quota and Voice Agreement, as well as recent reforms to the New Arrangements to Borrow, will require follow through. Beyond this, there is difficult work to be done to deliver on the new set of reforms. But I am confident that our membership will rise to the challenge,” Mr. Strauss-Kahn underlined.