Nigeria’s Wistful World Bank Wallop

Nigerian stocks were unmoved from their modest upturn as Finance Minister Okonjo-Iweala, a former senior World Bank executive, was nominated by African representatives as a candidate for president of the organization as incumbent Robert Zoellick departs at end-June. She was grateful for the support but did not actively campaign as her team strives to regain momentum from the petroleum subsidy removal backlash. Under a companion adjustment, power rates will also rise, as anti-corruption crusader Nuhu Ribadu will lead a task force investigating oil revenue leakage. A landmark bill to split the commercial and regulatory functions of the National Petroleum Corporation and clarify the regime for foreign and private participation is a top economic agenda item to be passed this year, officials insist. Inflation has eased with less drastic subsidy reductions than originally proposed, and with buoyant world prices one-third of the budget deficit will be covered by the excess crude account. The naira has calmed in the 155 to the dollar range on $35 billion in international reserves. Institutional investors are creeping back to equities with big listed banks slowly disengaging from previous peril, but retail players, burned on margin loan overextension, remain shy. A congressional investigation into the stock market’s post-crisis collapse degenerated into a shouting match between the committee chair and enforcement head over alleged malfeasance in their respective capacities. The exchange chair at the time was forced to resign over fraud and mismanagement charges, and related criminal and civil cases are still in course. Politicians were widely accused of condoning and profiting from improper broker behavior and in a rare guilty plea a state governor who fled the country admitted to $250 million in illicit funds that may have come partially from such involvement to avoid a UK jury trial.

With last year’s lifting of restrictions, foreign investors have returned to the high-yield Treasury market, especially as worries increase over next-door Ghana heading into elections. The presidential contenders who have faced off before are relatively tied in voter surveys, and spending is expected to repeat a 5 percent of GDP budget deficit even with new offshore oil revenue. Yields have jumped 100 basis points with the central bank hiking rates to keep inflation in single digits and the cedi firm. Nerves have also frayed in the West African Franc zone closely tied to Europe with regular devaluation rumors and increased domestic debt placement on the regional bourse to bridge fiscal gaps. The interbank market is undeveloped and non-performing loans are at 15 percent, according to the IMF’s latest check. GDP growth and inflation were set to improve with Cote D’Ivoire’s reconstitution, but a military coup in Mali has again upset the mix and the World Bank, regardless of prospective heads, has cut ties in another blow.