EDITORIAL TEAM - Zenith Bank - In your best interestto grow geometrically while food production would increase only arithmetically. At this time, the revered Malthus neither ... your

EDITORIAL TEAM

MARCEL OKEKEEditor

EUNICE SAMPSONDeputy Editor

ELAINE DELANEYAssociate Editor

IBRAHIM ABUBAKARSUNDAY ENEBELI-UZOR

OLUWASEUN OLAOYEAnalysts

SYLVESTER UKUTROTIMI AROWOBUSOYE

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EDITORIAL BOARD OF ADVISERS

UDOM EMMANUELNONYE AYENI

GIDEON JARIKREMICHAEL OSILAMA OTU

ZENITH ECONOMIC QUARTERLYis published four times a year

by Zenith Bank Plc.

Printed by PLANET PRESS LTD.Tel 234-1-7731899, 4701279, 08024624306,

E-mail:[email protected]

The views and opinionsexpressed in this journal

do not necessarily reflectthose of the Bank.

All correspondence to:The Editor,

Zenith Economic Quarterly,Research & EIG,Zenith Bank Plc

7th Floor, Zenith HeightsPlot 87, Ajose Adeogun Street,

Victoria Island, Lagos.Tel. Nos.: 2781046-49, 2781064-65

Fax: 2703192.E-mail:[email protected],

[email protected]: 0189-9732

FROM THE MAIL BOXThis contains some of the acknowledgements/commendation letters from our teeming readersacross the globe.

PERISCOPEThis is a panoramic analysis of major develop-ments in the economy during the period underreview and the factors underpinning them.

POLICYContains the ‘Guidelines for Commercial Agricul-ture Credit Scheme’ (CACS), released by theCentral Bank of Nigeria (CBN) recently as part ofefforts to promote commercial agriculture devel-opment and food sufficiency in Nigeria.

GLOBAL WATCHA review of current recession fears in the globaleconomy arising from the debt crisis in Europe,economic slowdown in China, US, etc, and theimpact of these on Africa’s commodities export.

ISSUES IThis is a critique of financial crimes in Nigeriawith specific emphasis on Advance Fee Fraud(‘419’) and the many local and international ef-forts to arrest the hideous menace

ISSUES IIIt examines Nigeria’s agricultural transformationagenda, highlighting the options for overcomingthe country’s decades of overreliance on foodimportation to meet ever growing domestic de-mand

ISSUES IIINigeria’s public debt, both domestic and externalhas experienced a surge in the last couple ofyears. This piece analyses the growing trendsand concerns about the country’s debt manage-ment strategy

FOREIGN INSIGHTSA review of the worsening condition of the Span-ish economy and the impact of this dilemma onEuropean and global economies and markets

DISCOURSENigeria’s electricity supply challenges remain atopical issue at this point in time in the country’shistory. This piece examines recent policythrusts in the sector and the scorecard so far

FACTS & FIGURESThis contains economic, financial and businessindicators with annotations.

2 Zenith Economic Quarterly July 2012

T

In 1798 Thomas Robert Malthus predicted that short-termgains in living standards would inevitably be undermined ashuman population growth outstrips food production, andthereby driving living standards back toward subsistence. Wewere, he argued, condemned by the tendency of populationto grow geometrically while food production would increaseonly arithmetically. At this time, the revered Malthus neitherhad Nigeria in mind nor did he envisage the debilitating im-pact on food production (or, indeed agriculture) that oil dis-covery and the resultant petro-dollar would have on the coun-try.

Howbeit, Nigeria’s population growth had since out-stripped its food production, to the extent that a country thatwas hitherto a net exporter of a number of food items had incourse of time turned a massive importer of such commodi-ties. Ironically, successive governments in the country havealways come up with one programme or the other to turn thesituation around; but virtually all such efforts ended up asmere slogans and sing-songs, with little or no results to show.Against this backdrop, under the topic: “Agric Transforma-

tion: Tackling Nigeria’s Food Import Dependency,” we re-view the dismal state of the agric sector in the country, at-tempt a peep into the Agric Transformation Agenda (ATA)of the present administration and propose some way for-ward. One obvious point however, as our report indicates, isthe uniqueness of the current approach to tackling the foodimport dependency challenge for, according to the ATA docu-ment: “the agricultural transformation plan is designed toindustrialize the agricultural sector so that it becomes a busi-ness that can create jobs, export earnings and prosperity.”This gives a lot of hope.

Incidentally, this agric transformation in the country isabout to take place at a time when commodity export-depen-dent nations, especially those in Africa (including Nigeria),are gripped by the fear of the ripple effects of the worseningrecession in Europe and other regions. The import of this forNigeria as a largely mono-product economy that dependshugely on crude oil exports is, for now, unfathomable. ButNigeria is not the only nation in this ‘dilemma boat.’ Hence,our topic: “Recession Fears and Africa’s Commodity Export:

What Lies Ahead?” analyses the vulnerabilities and uncer-tainties that most African commodity export-dependent na-tions face as the Euro-zone, America, China and UK battlewith various degrees of economic slowdown. The authornotes that although “all commodities may not be as volatilein price as crude oil, but one feature that is common withvirtually all of them is the regular, swift changes in theirpricing.”

Related to the issue of commodity price volatility is theconcern for the burgeoning public debt profile of Nigeria inrecent times, just close to a decade after the country exitedthe Paris Club debt debacle. Thus, in the topic: “Nigeria’sPublic Debt Profile: Current Trends and Concerns,” the au-thor explores the pros and cons of external and local debts aswell as the makeup of the debt stock. He sums up that “oneof the most plausible lines of action for the government is toset a debt ceiling and commence drastic reduction of thecurrent debt level,” adding that the proposed sinking fundfor debt retirement is also a welcome development.

The piece on “Navigating the Electricity GovernanceConundrum in Nigeria” analyses the chequered course ofelectricity sector in the country, up to the present effort attackling the lingering challenges head-on. The author exam-ines all hues of reforms in the sector, zeroing in on today’s‘Power Sector Reform Act’ and the ‘Roadmap to PowerSector Reform’ which he believes could take the country to‘Eldorado’, if implemented effectively.

Our other masterpieces include a panoramic insight intothe commodities and financial markets across the globe un-der the topic “The Rain in Spain…”; “Agenda for Develop-ment: Advance Free Fraud (2)”; “Economy: Figures, RatingsSustain Optimism” as well as the usual ‘Facts and Figures.’

Have a delightful reading, as always!

Howbeit, Nigeria’s population growth had sinceoutstripped its food production, to the extent thata country that was hitherto a net exporter of anumber of food items had in course of timeturned a massive importer of such commodities.

“There are people in the world sohungry, that God cannot appear to themexcept in the form of bread.”– Mahatma Gandhi


I am directed by the HonourableMinister of State for Defence, Erelu(Dr) Olusola Agbeja Obada to ac-knowledge as well as express hergratitude for the copy of your Ze-nith Economic Quarterly (ZEQ)sent to her.

The Honourable Minister is ex-cited about the focus of this edi-tion “option for sustainable devel-opment of Nigeria” which is an av-enue to analyzing the economy forgrowth which is part of the Trans-formation Agenda of Governmentheaded by President GoodluckEbele Jonathan. More grease to yourelbows.

Please accept the assurances andesteemed regards of theHonourable Minister of State forDefence.

Yours Faithfully,Babatunji OmoleSA (HMOSD)Ministry of Defence, Federal

Republic of Nigeria

Compliments from Port HarcourtChamber of Commerce, Industry,Mines and Agriculture (PHCCIMA)!

We are pleased to acknowledgethe receipt of your interesting andeducative Zenith Economic Quar-terly (ZEQ) journal of January, 2012edition.

We wish to express our President’sgratitude and commendation foryour quality publication of currentbusiness news critical to the Nige-rian and global economies, and en-courage you to attain greaterheights.

We look forward to re-ceiving future editions ofthe ZEQ journals.

Please, accept the assuranceof the President and entire mem-bership of PHCCIMA.

Yours faithfully,For: PHCCIMAMr. Erastus ChukundaDirector GeneralPort Harcourt Chamber of Com-

merce, Industry, Mines and Agri-culture

We wish to acknowledge withthanks receipt of your letter dated30th March. 2012 forwarding a copyof the January 2012 edition on theabove-mentioned subject.

We wish to express appreciationto your Organization for keepingthe Embassy fully informed on is-sues regarding sustainable develop-ment of Nigeria, which is critical toNigeria’s economic transformation.Also, we would like to congratulateyou on the achievements you haverecorded so far on this important

project.The Nigerian Embassy in Brazil

will continue to collaborate andwork with your Organization in pro-moting bilateral trade and invest-ment between Nigeria and Brazil. Itis our hope that the volume of tradebetween our two countries will con-tinue to grow for the mutual ben-efits of our people.

Kind regards.Yours ever.ChanceryEmbassy of the Federal repub-

lic of Nigeria, Brasilia, Brazil

I am directed to acknowledge withthanks, receipt of the above men-tioned Publication, which providesvery vital information on global, aswell as, Nigerian economy thatwould immensely assist the Missionin its quest to attract Investors toNigeria.

Please accept the assurances of HisExcellency’s highest consideration.

Warm regards.M. S. IsaFor: AmbassadorEmbassy of the Federal Repub-

lic of Nigeria,Zamalek, CairoArab Republic of Egypt

I am directed to acknowledgewith thanks receipt of theApril 2012 edition of theZenith Economic

Quarterly (ZEQ) and to in-form you that the journal will serveas a good reference material for pro-moting investments in Nigeria.

Please accept, the assurances ofthe High Commissioner’s best re-gards

O. OlonijoluFor: High CommissionerNigeria High CommissionLondon

I have been directed by theDeputy President of the Senate, Sen.Ike Ekweremadu, CFR to acknowl-edge receipt of your complimen-tary copy of the April 2012 editionof the Zenith Economic Quarterlypublication.

I am also to covey His Excellency’sappreciation of your kind gestureand goodwill.

Thank you once again and pleaseaccept the assurance of HisExcellency’s best regards.

Ben OguguaChief of Staff to the Deputy

President of the Senate, FederalRepublic of Nigeria

I acknowledge with thanks, receiptof complementary copy of yourZenith Economic Quarterly (ZEQ)for the month of April, 2012 Edi-tion sent to the Economic Adviser/Vice Chairman, State Planning Com-mission, Calabar.

Your economic analysis and policyrecommendations are quiet impres-sive. It is a good reference material.Well done!

Thank you.Ndem AyaraEconomic Adviser/Vice Chair-

man, Cross River State PlanningCommission, Calabar.

I wish to acknowledge with thanksthe receipt of one copy of yourmagazine Zenith Economic Quar-terly (ZEQ), Vol. 8, No. 2 April, 2012,which you donated to the Library.

We appreciate your kind gesture.The publication shall no doubt beof immense use to both staff andstudents of the University.

Thank you.Agbese, FlorenceFor: LibrarianUniversity of Abuja, Nigeria

I am directed to acknowledge re-ceipt of your letter dated 28th June,2012 wherewith was attached a copyof the April, 2012 edition of theZenith Economic Quarterly (ZEQ)on Cashless Economy: “Imperativesfor Legal and Regulatory Frame-work”.

The Mission wishes to express itsprofound gratitude to Zenith BankPLC on such a constructive refer-ence material and hopes that moresectors of the economy would beexplored in future.

Please, accept the assurances of

the Charge d’ Affaires’ highest es-teem.

M.O. ClementFor: Charge d’ Affaires (a.i)Embassy of NigeriaRome, Italy

I am directed to acknowledge withmany thanks your letter of 28th June,2012 which you sent a copy of theApril, 2012 edition of your abovementioned journal which focusedOn the “Cashless Economy: Impera-tives for Legal and Regulatory” andan analysis of the Prospects of Ni-gerian Maritime Sector etc.

Importantly, the Mission found thejournal very educative, informative,current and very relevant in thecourse of our numerous assign-ments outside Nigeria. We appreci-ate your kind gesture in providingthe Embassy with the publications.

Please accept the assurances of theAmbassador’s highest consideration.

M.S. Ogundero (Mrs)For: AmbassadorEmbassy of the Federal Repub-

lic of NigeriaBudapest, Hungary

I am directed to acknowledge withprofound thanks, receipt of the Ze-nith Economic Quarterly (ZEQ) for

the month of April, 2012 that

the Embassy just received.I am to add that the Embassy

deeply appreciate the contents ofthe quarterly magazine as it wouldhelp our Mission in its investmentdrive in Thailand as well as inMyanmar our country of concur-rent accreditation.

While thanking you once again,please accept the assurances of theAmbassador’s highest regards.

Daniel AyubaFor: AmbassadorEmbassy of NigeriaBangkok, Thailand

July 2012 Zenith Economic Quarterly 5

Tof the Nigerian economy were also part of the features. All these were in the backdrop ofthe prevailing security concerns.

These notwithstanding, performance data and ratings on the economy during the halfyear-ended June 30, 2012 remain causes for optimism about the country’s outlook for therest of the year. Although budgetary projections or expectations for the period may nothave been fully met, data from the National Bureau of Statistics (NBS) beat analysts’calculations in several ways. Inflation rate (as measured by consumer price index—CPI)for instance, almost remained flat at an average of 12.80 per cent. Specifically, the CPIwhich stood at 12.90 per cent in April dropped to 12.70 per cent in May and came backto 12.90 in June. It was at 12.60 in January. All these were however still above the 2012budgetary benchmark of 9.50 per cent, but below the Central Bank of Nigeria (CBN’s)mid year forecast of 14.5 per cent. But in its July 2012 meeting the Monetary PolicyCommittee (MPC) of the CBN noted that apart from the lag effects of the partialremoval of petroleum subsidy in January other factors could still influence inflation.These, according to the MPC include borrowing by government to cover large fiscal

he Nigerian economy was marked by mixed features during the first half2012, starting with a huge loss in national output estimated at billions ofNaira during the nation-wide strike in January. There were also some damp-ening effects of low crude oil demand from major trading partners notablythe US, Euro-zone and China due to their subsisting domestic/regionaleconomic challenges. Falling oil prices in the international market and weakaggregate domestic demand following rising prices across major segments

PERISCOPE

*By Marcel Okeke


PERISCOPE | Economy: Figures,Ratings Sustain Optimism

deficits in the 2012 budget as well as theupward review of electricity tariffs and im-port duty on wheat and rice in July 2012.

In a similar vein, the revised Gross Do-mestic Product (GDP) growth rate projectedby the National Bureau of Statistics (NBS)for the second quarter 2012 at 6.37 per centwas higher than first quarter level of 6.17per cent, indicating improved growth in theeconomy. NBS had earlier forecast the GDPgrowth in the second quarter to be 5.34 percent. Overall, GDP growth for 2012 wasprojected at 6.38 per cent, down from therealized growth rate of 7.74 per cent in 2011.The non-oil sector, according to the NBS,remained the major driver of GDP growth,recording 7.52 per cent increase in contrastto the oil sector which contracted by 0.24per cent during the first half of the year.

The mixed performance of the economywas best reflected in the movement of pricesof crude oil. While the price of the com-modity in the international market rosesteadily in the first three months of the year,it declined consistently in the second quar-ter of the year. Specifically, the average spotprice of Nigeria’s reference crude, the BonnyLight, came down from US$121.10 per bar-rel in the first quarter of 2012 to US$109.32per barrel in the second quarter. Indeed, the Source: CBN, R & EIG

Source: OPEC, R & EIG

http://upload.wikimedia.org/wikipedia/commons/4/43/Oil_rig_in_Gibraltar.JPG



Organization of Petroleum ExportingCountries (OPEC) average monthlybasket price of crude oil opened theyear at US$117.48 per barrel but roseto US$122.97 per barrel in March. Itdeclined to US$118.18 per barrel andUS$108.07 per barrel in April and May,respectively; and closed the half year2012 at US$93.98 per barrel.

This pattern in oil price movementis attributable to a number of factors,including the massive liquidation of net-long speculative positions, heightenedEuro-zone concerns, a weakening eco-nomic outlook, and a steady rise in glo-bal crude stocks. According to OPEC,the uncertainties facing Europe and theslowdown in the emerging economiesled to a shift in market sentiments, andthis has triggered a strong outflow offunds from paper oil market, furtheramplifying the recent downward trendin prices. However, for Nigeria, therewas steady rise in oil production allthrough the second quarter, owing es-sentially to a ramp up in productionfrom new fields and fewer disruptionsin existing fields.

Without doubt, the scenario play-ing out in the international oil market

which was dominated by almost con-sistent decline in the prices of the com-modity in the later part of the secondquarter , impacted on Nigeria’s exter-nal reserves and the foreign exchangemarket. Specifically, Nigeria’s foreignexchange reserves grew steadily in thefirst five months of the year, fromUS$34.63 billion in January toUS$37.69 billion in May, a growth ofabout 8.84 per cent. The reserves how-ever declined by 2.57 per cent in Juneto close the first half 2012 at US$36.72billion. Obviously the increase in thereserves during the first five monthsreflected the generally favourable com-modity prices and inflows of capital.

The mixed performance of theeconomy during the period under re-view reflected so much in the foreignexchange market where the averageexchange rate of the Naira vis-à-visthe US dollar appreciated marginallyto N155.38/$ in June 2012, from alevel of N156.32/$ in January. How-ever, in both the inter-bank and paral-lel segments of the market, the Nairaexperienced some depreciation againstthe dollar. Thus, while the average ex-change rate of the Nigerian currencyin the inter-bank market in April wasN157.66/$, it came to N159.65/$ inMay and dropped to N162.50/$ inJune—a total depreciation of aboutthree per cent within the second quar-ter 2012. In the parallel market, thelevel of depreciation was about 3.5 percent, from N159.00/$ in April toN164.50/$ in June.

Another striking feature of theNigerian economy during the first half2012 was consistence increase in itspublic debt stock. From US$5.667 bil-lion in December 2011, the nation’sexternal debt rose to US$5.912 billionin March 2012, and increased furtherto US$6.035 billion as at June 30,2012. Similarly the domestic compo-nent of the debt which ended 2011 atN5.26 trillion rose to N5.967 trillionat the close of first quarter 2012; itshot up further to N6.152 trillion as atJune 30, 2012. In dollar terms, thenation’s total public debt at the end ofthe first half 2012 stood at US$45 bil-lion. This translates to N7.094 trillion,according to the Debt Management

Office (DMO) data for the period.Further breakdown by the DMOshows that the 36 states and the Fed-eral Capital Territory (FCT) accountfor US$2.215 billion or 36.70 per centof the external debt stock (US$6.036billion) as at the close of the first halfof the year. Four states—Lagos,Kaduna, Cross River and Ogun—topthe states on the debt list, accountingfor 8.58 per cent, 3.27 per cent, 1.81per cent and 1.60 per cent respectivelyof the total debts of the states as atJune 30, 2012.

Other features of the economyduring the period under review includeongoing reforms in the banking, agric,capital market, aviation, power and afew other sectors. A number of inter-national agencies including Standards& Poor’s (S &P) and Ernst & Young(E & Y) have also raised confidenceand optimism on the Nigerian economythrough their assessments and reports.Specifically, at a time when the creditrating of many nations are being down-graded, S & P, the global rating agency,expressed confidence in the Nigerianeconomy by upgrading its outlook onthe country’s credit rating to positive(B+), from stable. The upgrade, ac-cording to the rating agency, is inspiredby the restructuring undertaken by theFederal Government and the strength-ening of the banking sector.

According to S & P, its new posi-tive outlook means there is now at leasta one-in-three likelihood of an upgradeif Nigeria’s reform initiatives to sup-port economic growth, build strongerbuffers against Nigeria’s dependenceon petroleum revenue and reducepressure on the exchange rate. Also,Ernst and Young, one of the world’slargest professional service firms, inits quarterly Rapid-Growth MarketForecast (RGMF), released in April2012, said that Nigeria remains one ofthe three fastest growing marketsamong the 25 leading rapid-growthmarkets.

Senior economic adviser to Ernst& Young’s Rapid Growth MarketsForecast, Carl Astorri explained: “TheRGMs are well placed to weather themajor risks facing the global economyat the present time, given that they have



the space to relax fiscal and monetarypolicy. This has already happened insome RGMs including in all of theBRICs. It is likely that there will befurther easing of monetary policy inthe months ahead, particularly if theglobal economy deteriorates further.”On Nigeria, the senior partner, Trans-action Advisory Services, Ernst &Young, Nigeria, ‘Bisi Sanda said “if thegovernment of Nigeria completes itsprivatization of the power sector as-sets in 2012, it will provide much re-quired fresh breath to the much de-layed stimulus to the manufacturingsector, including the reactivation ofover 100 textile mills that closed downor relocated from Nigeria between2000 and 2007. Power is an enabler inNigeria,” Sanda said.

Also worthy of note are some keystrides in the agric sector during thefirst half 2012 namely the release ofthe Agricultural TransformationAgenda (ATA) and the inauguration ofthe Agricultural Transformation Imple-mentation Council (ATIC) by PresidentGoodluck Jonathan on May 14, 2012.The ATA sets a target of achieving anadditional 20 million metric tons offood in the domestic food supply by2015. It is also to create 3.5 millionjobs, both farm and non-farm, overthe next five years. Over all, the goalof ATA is “to turn Nigeria away frombeing a net food importing country tobecome a self-sufficient and food ex-porting country.”

In specific terms, according to thePresident during the ATIC inaugura-tion, ATA is targeted at increasing ef-ficiency and profitability along thevalue-added chains of 12 selected keyagricultural commodities, namely: cot-ton, cocoa, cassava, oil palm, maize,soya bean, onion, rice, livestock, fish-eries, tomato and sorghum. In pursuitof these, the Federal Government haseffected reforms in the fertilizer sec-tor; it is no longer buying or selling thecommodity. These are now in thehands of private sector operators. Sev-eral dams and irrigation infrastructureto allow farmers take advantage ofdouble cropping and diversification intohigh value horticultural crops are al-ready ongoing.

The Federal Government has alsoembarked on other steps in pursuit ofthe ATA, including the ‘cassava flourbread’ initiative under which bread andsome confectionaries are being madewith 40 per cent cassava flour. Fur-ther to this, tariff and levies on wheatflour, wheat grain and rice have beenhiked. Indeed, effective July 1, 2012,wheat flour attract a levy of 65 percent to bring the effective duty on thatitem to 100 per cent, while wheat grainattract a 15 per cent levy, bringing theeffective duty to 20 per cent. Similarly,there is also a levy of 25 per cent onbrown rice, bringing its total levy to 30per cent. Furthermore, to encouragedomestic rice production, a 40 per centlevy has been placed on imported pol-ished rice, leading to an effective dutyrate of 50 per cent. Also, effectiveDecember 31, 2012, all rice millers areto move towards domestic production

and milling of rice, as the 50 per centlevy would be raised further to 100per cent, and without option of waiveron rice and wheat importation.

The Federal government has alsoentered into collaboration with a num-ber of state governments in pursuit ofATA through Growth EnhancementSupport, GES programme. This initia-tive has also been used to flag off theCommercial Agricultural CreditScheme, CACS, backed by the CentralBank of Nigeria.

The GES programme is a key com-ponent of the ATA which seeks toempower 20 million resource-poorfarmers in the six geo-political zonesof the country out of subsistence farm-ing to self sufficiency and commercialfarming.

The Government initiatives are alsoalready attracting support and partner-



a mere 4.19 per cent growth in spiteof the good financials turned in bymany quoted companies in the secondquarter, especially the deposit moneybanks. Market statistics show that theASI surged from 20,652.47 points asend-March 2012 to 22,045.66 pointsin April, but declined to 21,599.57points as at the end of June. Marketcapitalization however gainedN362.706 billion at the end of firsthalf 2012 at N6.895 trillion comparedto N6.532 trillion as at the beginningof the year. The total volume and valuetraded for the first half of the yearwas 50.6 billion shares and N315.6 bil-lion respectively. This is an increase of13.7 percent in volume and a decreaseof 11.9 per cent in value traded againstlast year’s figures. Despite the increasein volume traded, the decline in valuetraded is indicative of the generallypoor performance of share prices.

A number of other factors includ-ing the probe of the “near collapse”of the market by the National Assem-

Source: NSE

all key staple food commodities usingthe value chain approach.

THE CAPITAL MARKETThe stock market started year 2012on a very sluggish note due, in part, tothe economic disruptions arising fromthe protests consequent upon the par-tial fuel subsidy removal early Janu-ary. In the course of the first quarter,some gains were made but got lost dueto uncertainty created by other devel-opments in the local and globaleconomy. Overall, the first half 2012market performance was characterizedby ups and downs and shifts in inves-tors’ confidence, liquidity variationsand concerns about global economicrecovery. Thus, The Nigerian StockExchange All-Share Index (ASI) andmarket capitalization closed the firsttrading week of the year at 20,725.30points and N6.531 trillion respectively.

Within the first six months of theyear however, the market returned to

ship from reputable relevant global in-stitutions including the World Bank andthe International Fund for AgriculturalDevelopment (IFAD)—the two orga-nizations which Presidents were alsonamed as members of the ATIC. TheWorld Bank through its assisted Com-mercial Agriculture DevelopmentProject (CADP) will be boosting ATAwith US$300 million. According to theCADP Team Leader, Dr. Lucas Akapa,the World Bank is putting in additionalUS$150 million into the CADP andanother US$130 million into theFADAMA Development Project(FDP).On their part, virtually all gov-ernments of the 36 states in the coun-try are on with serious efforts to de-velop the agricultural sector. In LagosState for instance, there is the Strate-gic Programme for Accelerated Agri-cultural Growth (SPAAG) aimed atstimulating agricultural production for


PERISCOPE | Economy RemainsUpbeat, Gaining Traction

bly, leadership tussle and changes at theSecurities and Exchange Commission(SEC) and litigations over governingcouncil membership and headship atthe NSE also impacted the capitalmarket during the first half of the year.There were other initiatives; one amongwhich was the signing of a Memoran-dum of Understanding (MoU) betweenThe NSE and Lotus Capital Limitedto develop and manage the first indexcreated to track the performance ofShari’ah compliant equities on the floorof the Nigerian Stock Exchange. Theindex has since been launched; bring-ing the variety of The NSE indices toseven. The NSE Lotus Islamic Index(NSE LII) was the first index the NSEdeveloped with a local partner.

Although there were no Initial Pub-lic Offerings (IPOs) during the firsthalf of 2012 in the market, few newlistings took place. Austin Laz Plc wasthe first company to be listed, by in-troduction, in the Exchange in 2012.Its 1,079,860,000 ordinary shares of50Kobo each at N2.00 came into themanufacturing sector. FortisMicrofinance Bank Plc also got listedby introduction with its 1,630,091,000ordinary shares of 50 kobo each atN5.00 per share. The listing addedN8.15 billion to the market capitaliza-tion of The Exchange.

POWER ANDELECTRICITYSome of the dominant issues in thepower sector during the first half 2012have been the effective ‘privatization’of the Power Holding Company ofNigeria (PHCN), successful ‘redeploy-ment/reassignment’ of its existing staffand the metering and billing challengesin the industry. The Metering InquiryCommittee set up by the Nigerian Elec-tricity Regulatory Commission (NERC)had early in the year revealed in its re-port that less than 50 per cent of theregistered customers in the nation’selectricity sector are metered. The re-port said that out of the total numberof customers with meters (2,893,701),about 701,385 or 24 per cent of themeters are faulty. According to report,the remaining registered customers

without meters are therefore left at themercy of the “estimated billing.” It alsorevealed that over 50 per cent of Ni-gerian households do not have accessto electricity from the national grid.

With this subsisting trend, NERCembarked on steps to attain a certaindegree of metering as a condition pre-cedent for the implementation of anew Multi-Year Tariff Order (MYTO)billing system. This new tariff regime(MYTO2) took off on June 1, 2012—allowing electricity consumers to payfixed charges once a month irrespec-tive of the number of times prepaidmeter is charged. According to NERCdocument, existing customers that havenot paid for meters no longer have todo so “as the cost of meters have beenincluded in MYTO” while new custom-ers will only pay standard connectionfee with no additional charges for themeter.

Under the new tariff regime, theFederal Government is providing asubsidy of N50 billion in 2012 to sup-port small residential customers, in

addition to the ‘cross subsidies’ fromlarge customers that is implicit in thetariff design.

On the privatization front, the Bu-reau of Public Enterprises (BPE) hasbeen on with the efforts to ‘off load’the 18 power generation, distributionand transmission companies—theproducts of the ‘unbundling’ of thePHCN. Earlier in the year, through acompetitive bidding process conductedby the BPE, Manitoba Hydro Interna-tional (a Canadian company) wasawarded contract to manage the Trans-mission Company of Nigeria (TCN) –one of the successor PHCN compa-nies. Manitoba which has assumed theoperational control of the TCN is ex-pected to transform the agency into atechnically and financially efficientcompany during their three-year con-tract. Under the management ofManitoba, TCN is expected to effec-tively and reliably wheel power gener-ated by generation companies to loadcentres.

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PERISCOPE | Economy RemainsUpbeat, Gaining Traction

BANKING AND FINANCEThe first half of 2012 could, to a largeextent, be regarded as a period of rapidrecovery and growth by the bankingindustry. This is evident in the robustfirst and second quarter financial/in-terim results posted by most of thedeposit money banks. In deed, variouslocal and foreign rating agencies haveeither maintained the status of Nige-rian banks with a positive outlook orupgraded their rating status. ZenithBank, First Bank, Access Bank andGTBank have been amongst the toppicks for rating agencies. Through wide-spread and consistent reforms, manyof the risks hitherto present in the sys-tem have been addressed: non-per-forming loans (NPL) ratio has substan-tially gone down to an average of aboutfive per cent as at June 2012.

Each of the deposit money bankshas been perfecting strategies on howbest to adjust to the new banking model(that replaced universal banking) toseparate core banking from other prac-

tices. Although the apex bank hasgranted an extension for the banks tosubmit the licenses given them underthe universal banking model, it has notgiven a fresh deadline. Similarly, theimplementation of the InternationalFinancial Reporting Standard (IFRS)as ordered by the CBN, has taken root,with all the banks reflecting the pre-scribed pattern in their first and sec-ond quarter un-audited accounts. Fur-ther to this, the Financial ReportingCouncil (former Nigerian AccountingStandards Board) in conjunction withthe CBN has set up an academy totrain and sharpen the skills of all op-erators in the financial services sectorof the economy. All banks have alsocomplied with the Nigeria UniformBank Account Number (NUBAN)which transition period lapsed on May31, 2012.

The cashless policy of the apexbank has also been taking roots,through the pilot phase—cashliteLagos—which commenced early in

January this year. ‘Operation CashlessLagos’ has entailed deployment of au-tomated teller machines (ATMs) andPoint of Sale (POS) terminals both inbank locations and other strategicplaces across the country to facilitateall manner of payment for transactions,in place of cash. At the take-off ofthe pilot phase, it was projected thatby end-June 2012, about 75,000 ATMswould have been deployed and put touse in the Lagos area. During the pe-riod under review, not only has thisprojection been surpassed, mobilebanking has also been catching up inthe industry. This development is be-ing driven by the ‘financial inclusion’policy of the CBN, which seeks to getbanking services to hitherto ‘un-banked’ places all over the country.

The country stepped up its bid toincrease the volume and number ofcashless transactions late last year whenthe apex bank issued the first set ofoperating licenses for mobile bankingservices to about 12 companies. Thenumber has since stood at over 15—with virtually all the deposit moneybanks partnering them to provide mo-bile money services. In furtherance ofthis, the CBN has also acquired a newfraud prevention and detection deviceto tackle fraud in the emerging elec-tronic payment (e-payment) environ-ment.

Alongside these initiatives, each thedeposit money banks (DMBs) has beendevising various growth and market-share expansion strategies. Those thatembarked on some business combina-tions (mergers and acquisitions) havebeen handling their post-merger inte-gration issues tenaciously. Thus, dur-ing the first half of the year, AccessBank has been integrating with the de-funct Intercontinental Bank; Ecobankhas been doing same with the formerOceanic Bank; FinBank has been melt-ing into First City Monument Bank(FCMB), while the former EquitorialTrust Bank merged into Sterling Bank.Also, each of the banks, especially Ze-nith Bank, First Bank, GTBank andAccess Bank has been churning out avariety of e-products in tune with thecashless economy drive.

The Asset Management Corpora-



tion of Nigeria (AMCON) effectively commenced the pro-cess of selling the three nationalized banks that it acquiredlast year. Keystone, Enterprise and Mainstreet banks werethe defunct BankPHB, Springbank and Afribank, whichwere among the intervened banks.

One of the options AMCON is considering is to takethese banks to the public, so that Nigerians can have achance to invest in them. But according to the CEO of

AMCON, Mustaffa Chike-Obi, other options are still be-ing considered to arrive at who the ultimate investors wouldbe. “In the expression of interest on these banks, I thinkover 20 different bodies – banks and other investors –have expressed interest. We have not got to the stage whenwe can consider those expressions of interest yet. The pro-cess to get there requires: AMCON appointing an adviserthat will evaluate and determine the value of the banks,evaluate all the options available to AMCON,” he said.

TELECOMMUNICATIONSThe telecommunications industry continues to do well evenin the face of seemingly poor quality service for which thesector’s regulator—the Nigerian Communications Commis-sion (NCC) had penalized some of the GSM operators.The subsisting good health of the telecoms operators is

reflected in the continued improvement in the tele-density(the number of telephone lines per 100 persons) of thecountry which rose from 68.68 in January to 72.72 in Maythis year. The sector has in deed become one of the majorcontributors to the nation’s GDP since the liberalization ofthe industry over ten years ago. In the first quarter 2012,the sector recorded real GDP growth of 32.83 per centand contributed 7.29 per cent to the country’s GDP.

These strides notwithstanding, the sector has beendogged by poor service quality—a situation that becameapparent since the expiration of the ‘exclusivity period’ inthe industry that ended in 2006. Dropped calls, inability tomake successful calls, inability to recharge, poor voice clar-ity, call diversion, delayed and or undelivered text messagesare some of the challenges customers face. In the move tocheck the trend, the NCC had introduced some measuresincluding the enforcement of Key Performance Indica-tors (KPIs) and the ban on telecom promos, among others.In May this year, the NCC imposed a combined fine ofN1.17 billion on some of the GSM operators for per-

forming below the KPI benchmarksin the months of March and April2012.

In the efforts to keep improvingservice quality and delivery in the in-dustry, the NCC making moves to-wards the actualization of MobileNumber Portability (MNP) in thecountry in the next few months. In-deed, the industry regulator has di-rected network operators to providethe service free to subscribers. Mo-bile Number Portability allows sub-scribers to migrate from one serviceprovider to another and still retaintheir numbers. Section 6 (3) of Nige-ria Mobile Number Portabilty, Busi-ness Rules & Port Order Processesdated March 2012 states, inter alia:“Neither recipient operators nor do-nor operators may make a charge to

the customer for porting their number.”NCC issued the directive ahead of making MNP avail-

able to the public soon, after appointing a consortium oftelecom firms to handle the service which at present ex-cludes fixed wireless and fixed lines services.(* Marcel Okeke is the Editor,Zenith Economic Quarterly)


Polic

y

1.0. Establishment of the SchemeAs part of its developmental role, the Central Bank ofNigeria (CBN) in collaboration with the Federal Ministryof Agriculture and Rural Development (FMA&RD) hasestablished the Commercial Agriculture Credit Scheme,hereinafter referred to as CACS, for promoting commer-cial agricultural enterprises in Nigeria, which is a sub–com-ponent of the Federal Government of Nigeria Commer-cial Agriculture Development Programme (CADP). ThisFund will complement other special initiatives of the Cen-tral Bank of Nigeria in providing concessionary fundingfor agriculture such as the Agricultural Credit GuaranteeScheme (ACGS) which is mostly for small scale farmers,Interest Draw-back scheme, Agricultural Credit SupportScheme, etc.

2.0 FundingThe scheme shall be financed from the proceeds of theN200billion seven (7) year bond raised by the Debt Man-agement Office (DMO). The fund shall be made availableto the participating bank(s) to finance commercial agricul-tural enterprises. In addition, each State Government couldborrow up to N1.0billion for on-lending to farmers’ coop-erative societies and other areas of agricultural develop-ment provided such initiatives/interventions are line withthe objectives of CACS.

3.0 Objectives of the SchemeThe objectives of the scheme are:(i) To fast track development of the agricultural sector ofthe Nigerian economy by providing credit facilities to com-mercial agricultural enterprises at a single digit interest rate;

(ii) Enhance national food security by increasing food sup-ply and effecting lower agricultural produce and productprices, thereby promoting low food inflation;

(iii) Reduce the cost of credit in agricultural production toenable farmers exploit the potentials of the sector; and

(iv) Increase output, generate employment, diversify therevenue base, increase foreign exchange earnings and pro-vide input for the industrial sector on a sustainable basis.

4.0 Governance of the SchemeThe Central Bank of Nigeria and the Federal Ministry ofAgriculture and Water Resources shall collaborate to en-sure the success of the Scheme through a Programme Steer-ing Committee (PSC). The PSC shall be responsible for theoverall administration of the Funds and Scheme while theday-to-day implementation of the Scheme shall lie with theTechnical Implementation Committee (TIC). The TIC shallreport to the PSC which is the highest policy organ ofCACS.

(a) PROGRAMME STEERING COMMITTEE (PSC)The composition of the PSC shall be as follows:(i) Honourable Minister of FMA&WR or Rep - Chair-man(ii) Governor, CBN - Vice Chairman(iii) Federal Ministry of Finance - Member(v) Representative of commercial farmers - Member(vii) Programme Coordinator (CADP) - Secretary

FEDERAL MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT (FMA&RD)


POLICY | Guidelines for CommercialAgriculture Credit Scheme (CACS)

7.0 Eligibility for Participation in theScheme(A) Participating Bank (PB)(i) The Central Bank of Nigeria has approved the par-

ticipation of all deposit money banks under theScheme. All participating banks are required to spon-sor projects from any of the target areas indicated inthe Guidelines and bear all the credit risk of the loansthey will be granting.

(ii) The single obligor for any project from a participat-ing bank under the Scheme shall be N2.0billion whilefor State Governments shall be N1.0billion.

(B) Borrower:(i) Corporate and Large Scale Commercial Farms/Agro-EnterprisesThe borrower shall:• Be a limited liability company with asset base of not

less than N100 million and having the prospect to growthe net asset to N250 million in the next three yearsand complies with the provision of the Company andAllied Matters Act (1990)

• Have a clear business plan• Provide up-to-date record on the business operation

if any.• Have out growers programme, where appropriate• Satisfy all the requirements specified by its lending bank

(ii) Medium Scale Commercial Farms/Agro-EnterprisesTo participate in the Scheme the borrower shall:• Be a limited liability company with asset base of not lessthan N50million and having the prospect to grow the netasset to N150 million in the next three years and complieswith the provision of the Company and Allied Matters Act(1990)• Have a clear business plan• Provide up-to-date record on the business operation• Have out growers programme, where appropriate• Satisfy all the requirements specified by its lending bank

(iii) State Government /FCTTo participate under the Scheme, the States shall;• Submit an expression of interest• Present an Irrevocable Standing Payment Order

(ISPO) in favour of the participating bank, duly signedby the State Governor, Commissioner for Finance andthe State Accountant General

• Adhere to the repayment agreement reached with theparticipating bank (PB), upon contravention; the CBNshall assist the PB to invoke the ISPO.

• Have appropriate/functional structures on ground orset up structures for the deployment of the funds,which must include existing, registered Cooperative

(b) TECHNICAL IMPLEMENTATIONCOMMITTEE (TIC)The composition of the TIC shall be as follows:(i) Director, Development Finance Department (DFD)CBN - Chairman

(ii) Head, Agric. Credit Support Division,DFD, (CBN) - Member

(iii) Programme Coordinator (CADP)- Secretary

The TIC shall regularly undertake verifications of CACSprojects to ensure that banks operate in line with the objec-tives of the Scheme.

5.0 Target Agricultural Commodities andValue ChainsKey Agricultural commodities to be covered under theScheme are:(i) PRODUCTION:• Cash Crops: Cotton, Oil Palm, Fruit Trees. Rubber,

Sugar Cane, Jatropha Carcus and Cocoa.• Food Crops: Rice, Wheat, Cassava, Maize/Soya,

Beans/Millet, Tomatoes and Vegetables• Poultry: Broilers and Eggs Production• Livestock: Meat, Dairy and Piggery• Aquaculture: Fingerlings and Catfish

(ii) PROCESSING: Feed mills Development, Threshing,Pulverisation and Other forms of transmutation for valueaddition.

(iii) STORAGE: Commodities, Agro-Chemicals and Ware-housing

(iv) FARM INPUT SUPPLIES: Fertilizers, Seeds/Seed-lings, Breeder Stock, Feeds, Farm equipments & Machin-eries.

(v) MARKETING: Agricultural commodities under thefocal investment areas.

6.0 Definition of Commercial AgriculturalEnterprise;For the purpose of this Scheme, a commercial enterpriseis any farm or agro-based enterprise with agricultural asset(excluding land) of not less than N100 million for an inte-grated farm with prospects of growing the assets to N250million within the next three years and N50 million fornon-integrated farms/agro-enterprise, except in the caseof onlending to farmers’ cooperative societies.



Societies/Unions. The cooperatives must be at leastsix (6) months old with proven track records of re-payment

• Deploy CACS funds disbursed to farmers’ coopera-tive societies and other areas of agricultural develop-ment provided such initiatives/interventions are linewith the objectives of CACS.

• Satisfy all the requirements specified by the lendingBank

8.0 Modalities of the Scheme(i) Agricultural credit from the participating banks shall

be in the form of loans.(ii) Interest on loan shall not exceed 9.0 per cent inclusive

of all charges.

9.0 Acceptable CollateralThe security which may be offered to a participating bankfor the purpose of any loan under the scheme may be oneor more of the following:(i) A charge on land in which the borrower holds a legal

interest or a right to farm, or a charge on the landincluding fixed assets, crops or livestock.

(ii) A charge on the movable property of the borrower.(iii) A life insurance policy, a promissory note or other ne-

gotiable security(iv) Stocks and shares; and(v) Any other collateral acceptable to the participating

bank(s).

10.0 Loan Tenor(i) Loans shall have a maximum tenor of seven years and/

or working capital facility of one year with provisionfor roll over.

(ii) The Scheme allows for moratorium in the loan repay-ment schedule taking into consideration, the gestationperiod of the enterprise.

11.0 Limit of Liability under the Scheme(i) The maximum interest rate to the borrower under the

scheme shall not exceed 9 per cent, inclusive of allcharges.

(ii) The interest subsidy of the scheme shall be borne whollyby the Central Bank ofNigeria

12.0 Procedure for Applying for the LoanAll applications for loans under the Scheme shall be madeto the participating banks (PBs).All applications under the Scheme shall be treated by PB’swith due diligence.

13.0 Verification and Monitoring onProjectsAll projects shall be verified by the TIC after drawdown toensure that banks fully comply with the objectives of theScheme. The Development Finance Department of theCBN and the CADP Secretariat of FMA&RD shall peri-odically monitor the projects funded under the Scheme,and report to the PSC.

14.0 Verification in Other Terms and Con-dition of CACS LoanParticipating banks shall be required to secure a writtenconsent of the TIC and approval of the PSC before mak-ing alterations to the stipulated terms and conditions gov-erning any ongoing CACS facility.

15.0 Infractions and SanctionsPB(s)(i) Diversion of funds by the PB(s) shall attract a pen-

alty at the bank’s average lending rate at the time ofinfraction. In addition, such PBs shall be barred fromfurther participation under the scheme;

(ii) Non- rendition or false returns shall attract the pen-alty stipulated by BOFIA section 60;

(iii) Charging interest rate higher than prescribed shallattract the penalty stipulated by BOFIA section 60;

(iv) Any PB that fails to disburse the fund within 14 daysof receipt to the borrower shall be charged a penaltyinterest rate of MPR+300 basis points for the pe-riod the fund was not disbursed;

(v) Any other breach of the guidelines as may be speci-fied from time to time; and

(vi) Not withstanding the agreement between the PB andthe project promoter, the CBN has the right to rejecta request from any PB that contravenes any sectionof the Guidelines.

16.0 The Key Stakeholders of the Schemeare;(i) Federal Government of Nigeria (FGN),(ii) Central Bank of Nigeria (CBN),(iii) Federal Ministry of Agriculture and Rural Develop-

ment (FMA&RD),(iv) Debt management Office (DMO),(v) Participating Banks (PBs), and(vi) Borrowers

17.0 Responsibilities of StakeholdersFor effective implementation of the scheme and for it toachieve the desired objectives, the responsibilities of thestakeholders shall include:



(a) The FGNThe Federal Government of Nigeria shall be the issuer ofthe Bond

(b) The CBNThe Central Bank of Nigeria (CBN) shall:(i) Specify the rate at which PBs lend to borrowers un-

der the Scheme(ii) Absorb the subsidy which may arise in the pricing of

the loan to borrowers(iii) Absorb all other incidental/administrative expenses(iv) Select the participating banks under the scheme, with

due considerations of the general ability of the banks(v) Release funds to participating banks after confirma-

tion of intent/readiness of banks to disburse funds(vi) Receive and process the monthly returns made by the

PBs in relation to their loans under the Scheme(vii) Conduct spot audit on the PBs as well as monitor and

evaluate the borrowers’ enterprises in order to ascer-tain the performance of the Scheme

(viii) Retrieve funds when guidelines are not strictly adheredto by the participating banks

(ix) Prepare monthly reports to the National EconomicCouncil (NEC), the TIC and PSC.

(x) Retrieve funds from the PBs at the expiration of theloan tenure.

(xi) Make provision for the N200billion bond repayment(xii) Serve as the Chairman of TIC.

(c) The Federal Ministry of Agriculture and WaterResources FMA&RDThe FMA&RD shall:(i) Participate in the monitoring and evaluation of the

Scheme;(ii) Undertake periodic review of the enterprises financed

under the Scheme; and(iii) Serve as the Secretary to TIC and PSC

(d) The Federal Ministry of Finance (FMF)/ DebtManagement Office (DMO)The FMF/DMO shall:(ii) Issue the Bond on behalf of the FGN; and(iii) Raise money from the market.

(e) The Participating BanksThe participating banks shall:(i) Ensure due diligence is followed in the administration

of credit facilities(ii) Guarantee safety and purposeful application of funds

for on-lending,(iii) Bear 100 per cent credit risk(iv) Lend funds under the Scheme at the specified rate(v) Submit to the CBN, Letter of offer by the bank, Let-

ter/Evidence of Acceptance by the state, IrrevocableStanding Payment Order (ISPO), List of State Coop-eratives or Evidence of Intervention project, Dis-bursement schedule, Repayment schedule, the Credit

Risk Management System (CRMS) report of theborrower; and

(vi) Render monthly returns under the Scheme to theCBN on the reporting format.

(f) BorrowerThe borrower shall:(i) Utilize the funds for the purpose for which it is granted(ii) Insure the project being financed(iii) Make the project records available for inspection and

verification by the CBN, TIC and PBs;(iv) Adhere strictly to the terms and conditions of the

Scheme; and(v) State Governments/FCT shall utilize the funds as

specified by the CACS objectives.

18.0 Returns by Banks should be made tothe address below:Director,Development Finance Department,Central bank of Nigeria, Central Business districtAbuja. Tel: No.: +234 9 4623 8600Fax No.: +234 9 4623 8655

19.0 Repayment or Discontinuation of aCredit FacilityWhenever a credit facility is discontinued, the PB shall ad-vise the PSC immediately, giving particulars of the creditfacility.

20.0 Disbursement of Fund(i) PBs and borrowers should strictly adhere to agreed dis-

bursement/repayment schedule. Any deviation fromthe schedule should be mutually agreed between theparties and the TIC informed accordingly.

(ii) Disbursement of funds must be in accordance with thedue diligence of the Participating bank.

21.0 AmendmentsThis Guidelines is subject to review from time to time asmay be deemed necessary by the Project Steering Commit-tee

DEVELOPMENT FINANCE DEPARTMENTCENTRAL BANK OF NIGERIAABUJA

OCTOBER 2010


Glo

bal W

atc

h

By EUNICE SAMPSON

Aguably the most endowed conti-nent in raw materials, most Afri-can countries depend on primarycommodities for up to 70 percentof their total exports. This exposesthem to the volatile price move-ments that characterize commod-ity markets, worst during periodsof global economic recessionswhich unfortunately have becomea five-yearly affair.

The irrepressible price volatil-ity in global commodities marketis often beyond the control of boththe producers and consumers.Periods of price bubbles and falsesense of abundance, followedswiftly by periods of price slumpsand fiscal shocks – these have

been the rollercoaster experi-ences of several commodity de-pendent economies. Unfortu-nately, by their nature, the scaleand timing of commodity pricemovements are difficult to predict.

As another global recessionlooms, this time triggered mostlyby the euro zone debt crisis, thedirection of the commodity marketremains largely uncertain. And inthe face of this uncertainty, Afri-can economies are particularlyvulnerable. Unpredictable, sharpprice movements of these exportsconstitute a menace to policymakers in their quest for fiscal andmonetary stability. The externalenvironment is constantly beingscanned; and major consumingnations watched keenly for signsof positive economic develop-ments that would bode well forcommodities demand and prices.

Worse still are the single com-modity dependent countries thatare left without safety nets any-time there is a crash in the priceof their single export. These coun-tries are the worst victims of themarket dumping and productionsubsidy activities of advancedeconomies.

While some African countrieshave made good progress inbreaking the single commodityexport jinx, many are yet to attainthe level of industrialization re-quired to export finished products.Global commodities price volatil-ity will therefore, for a long timeremain a concern for Africa. So,as another global downturnlooms, the question is; what doesthe future hold for African com-modity export?

frica’s massive naturalresource is indeed agreat blessing; but onethat has come with enor-mous challenges. Inar-



African CommodityExport ProfileWhile the African continent is saturatedwith tapped and untapped natural re-sources, oil is today its leading exportcommodity. In 1956, Nigeria’s NigerDelta (Oloibiri, in today’s Bayelsa State)became the first place oil was drilled incommercial quantity in Africa by theAnglo-Dutch company, Shell.

Crude oil has since remainedAfrica’s biggest commodity export withthe continent holding 9.6 percent oftotal global reserves. Five countries –Libya, Nigeria Angola, Algeria andSudan control 90 percent of thecontinent’s oil reserve. Libya and Ni-geria control over 60 percent of this,and account for 3.3 and 2.8 percentrespectively, of the global reserve, ac-cording to a recent African Develop-ment Bank report. The same reportalso estimates that Africa’s reserve ofcrude oil rose from 53.3 billion barrelsin 1980 to 117 billion barrels in 2005and 127.7 billion barrels in 2009. Newoil discoveries are still being made inthe continent, with the latest in Ghana.

Africa is also a major exporter ofgold, accounting for up to 30 percent

of total global production of the pre-cious metal. South Africa is the largestgold exporter in the continent andamong the top three in the world.Ghana is the continent’s second larg-est gold producer. Other major export-ers include Zimbabwe, Tanzania, Mali,among others.

Diamond is another key commod-ity export from Africa. There are 10major diamond producing nations inAfrica, including Botswana, Demo-

cratic Republic of Congo, SouthAfrica, Angola, Namibia andGhana. Botswana is Africa’s big-gest producer in the global dia-mond industry valued at an esti-mated $158bn per annum.

Also, Cocoa is another com-modity export where Africa ex-cels. Ivory Coast, Ghana andNigeria are the biggest export-ers in the continent. Ivory Coastis the world’s largest cocoa ex-porter, accounting for about 30-40 percent of theworld market. The three WestAfrican countries above areranked among the top five glo-bal producers and exporters ofcocoa, a thriving commodity thathas become treasured aroundthe world especially for themanufacture of chocolate, past-ries and other highly sought af-ter consumables.

Uranium is yet another ma-jor export commodity from the

continent, with Namibia and Niger Re-public as the continent’s biggest pro-ducers and occupying the 5th and 6th

positions in the list of the world’s big-gest exporters, according to the WorldNuclear Association.

So much controversy surroundsthe management of proceeds fromAfrican natural resources. Agitationsfor resource control and more equi-table distribution of earnings fromcommodity exports have resulted incivil wars and socio-political unrests.

Sources: World Resources Institute; FAO

Africa: Oil Production by Country, 2009 (thousand barrels per day)

Source: African Development Bank


GLOBAL WATCH | Recession Fears andAfrica’s Commodity Export: What Lies Ahead?



These bloodsheds haveearned Africa’s vast naturalwealth the derogatory de-scription of ‘natural resourcecurse’.

However, several Africaneconomies are makingprogress in changing this un-pleasant perception withsome significant improve-ments in the management ofthese resources. In the lastdecade, a good number ofthem have leveraged on thisnatural capital to achievestrong, uninterrupted growth,resilient in the face of severeglobal recessions. Improvingproduction capacities athome and favourable pricesof their commodities in glo-bal markets have helped com-modities exporters to buildmuch needed socio-economicinfrastructure and nurturetheir bourgeoning democraticprocesses. Though they arealso often set back by priceslumps, some of them arenow better placed to trans-

late their robust export earn-ings to strong economicgrowth.

While questions persist onhow far Africa’s improvingeconomic fortune has helpedin poverty alleviation, thecontinent at least now hasgreater economic prospects.For those that succeed in en-trenching visionary, transpar-ent and purposeful leadership,strong economic advance-ment sustained over the lastdecade could signal the be-ginning of greater things tocome.

The Fate ofCommodityExports: KeyDeterminantsCommodities exports arehighly susceptible to sharpchanges in demand and sup-ply. Spiky price changes re-main a constant feature sincethe market is hardly in con-

trol of far reaching socio-economic and political devel-opments in the producingand consuming nations. Realor perceived changes in de-mand and supply sourcescould lead to sudden rise orfall in commodity prices.Threats of unrests in theMiddle East, which suppliesup to 30 percent of globalcrude oil; or prospects of aneconomic slowdown in theUS, China and Europe forexample which are the majorcrude oil consumers, couldexert dramatic upward ordownward pressure on theprice of crude oil. The sameis true for most other com-modity exports and interest-ingly, the timing or scale ofthese influential market fac-tors are ever difficult to pre-dict.

In July 2011, ConsensusEconomics, a leading macro-economic analysis firm car-ried out a survey (‘FactorsAffecting Commodity

Prices’) which asked expertsto compare and rate the dif-fering degrees of sensitivitywith which the prices of dif-ferent commodities respondto a range of influences atevery point in time in the glo-bal market. The rating was ona scale of 0 -10, with 0 indi-cating ‘no influence’ and 10signifying ‘very strong influ-ence’. The outcome of thesurvey, tabulated below, sum-marizes some of the key fac-tors that determine the priceof key commodities in theglobal market.

In this survey, most ofthe respondents identified‘Demand/business cycle’ asan influential factor in theprices of several commodi-ties, with rating averagingabout 6.8 out of 10 in total.For aluminum, copper, steeland palladium, respondentsranked this particular deter-minant 8 out of 10.

The influence of ‘Gov-ernment trade policies,’ was



downplayed by the outcomeof the survey, averaging ameager 1.8 for all commodi-ties, and an indication that thishas one of the least influ-ences on the price move-ments of commodities in anincreasingly globalised mar-ket.

On the other hand, theinfluence of ‘investmentfunds’ was rated as a criticalfactor, but only mostly forprecious metals, where it gota rating of 9 out of 10 forsilver and 6.7 for gold.

The outcome of the sur-vey also shows that the high-est determining factor forcrude oil price movement is‘supply/production con-straints’, where an averagescore of 6.3 was recorded.A good example is the ArabSpring. In early 2011, inves-tors became concerned aboutsupply disruptions followingunrests in Libya, Egypt andTunisia as public uprisingbroke out in efforts to un-seat the countries’ dictators.Oil prices rose above $100 abarrel in early March, reach-ing its peak of $113 a barrelin late April. The Arab Springwas perhaps one of the mostsignificant crude oil price de-terminants in 2011, worsenedby fears of a spread toneigbouring crude oil power-houses in the Middle East.

Perhaps one of the most

significant find-ings of the sur-vey is that differ-ent factors deter-mine differentcommodities pric-ing at differentpoints in time.This furtherraises the issue oft h eunpredictabilityof the commodi-ties market.

The surveyoutcome aside,other critical fac-tors that shapeprice changes in-clude the healthof the globaleconomy –growth prospects,the state of the fi-nancial servicessector, liquidity,inflation, wages,disposable in-come, employ-ment, among others. Com-modity prices are most likelyto experience a slump duringperiods of recessions and aboom during periods of sig-nificant growth and economicprosperity among the biggestconsumers.

A rather unusual devia-tion from this ‘norm’ wasduring the Great Recession(2007-2009) when crude oilprices hit an all-time record

Factors Affecting Commodities’Prices (on a scale of 0-10)

A Typical Example of Year-on-yearChange in Commodity Prices

Source: www.bankofcanada.ca


ply trends, by cutting production when the mar-ket seems saturated and increasing supplies whendemand increases. When the price of crude oilfalls within a certain threshold deemed unattrac-tive for investors, the cartel which supplies upto 40 percent of global crude oil tries to reducesupply to spur price increase. One of the waysit does this is to cancel some production invest-ment projects in efforts to rein in excess pro-duction. Though not always successful in its pricecontrol measures, the 12-member OPEC hashad significant impact on global prices of crudeoil.

Perhaps one of the factors that work infavour of most commodities is the lack of vi-able substitutes. Energy and agricultural com-modities are particularly vital in the manufac-turing and industrialization processes – a livewire

for developed and emerging economies. Major economieshave been kept on their toes in the last two decades inefforts to develop a viable, sustainable substitute to oil. Ifthis ever works, then some level of solution would havebeen found to crude oil price volatility, at least, the upwardprice swings. But this prospect also has its setbacks – first isthe issue of sustainability and second, the high cost of re-search and development which could prove even more costlyin real terms. Bio-fuel technology is already generating pub-lic outcry around the world for its negative impact on foodavailability and costs, since much of the raw materials sofar used in bio-fuel technology are food staples.

Commodity Export: What Lies Ahead?The global economy is currently dealing with the euro zonedebt crisis and fears of a contagion; a slowdown in keyeconomies outside the euro zone and of course, the newone – fears about a major economic deceleration in China.From its customary double digit growth record sustained inthe last decade, China advanced by 9.2 percent at year end2011; slowed to 8.5 percent in first quarter 2012 and fur-ther down to 7.5 percent in the second quarter. China now

high of $145 per barrelon July 3, 2008, at thevery peak of the reces-sion. This followed un-precedented socio-po-litical and labour unrestsin major exporting coun-tries including Iraq,Iran, Venezuela, Mexicoand Nigeria, coupledwith the activities ofmarket speculators anda dramatic decline insupplies from non-OPEC member coun-tries. Some analystsopine that this ‘rare’ de-velopment was one ofthe factors that deep-ened the recession.However, in December2008, barely 6 monthslater, crude oil prices fellbelow US$38 a barrel asrelative peace returnedto these oil majors andas worries about a dete-riorating US economyhit the market, markingone of the worst in-stances of commodityprice volatility in history.

The role of com-modities cartel cannotalso be ruled out. Thecase of the Organization of Petroleum Exporting Coun-tries, OPEC is particularly note worthy. The cartel has overthe decades managed to influence to varying degrees sup-

Volatile Global Commodity

Prices (July 17, 2012)

Source: Reuters




expects year end 2012growth of around 7.5 per-cent, its weakest growth inabout five years.

Highly export depen-dent, the Chinese economyhas been hit by troubles inthe euro zone, the US andothers, which has dampenedexports and investment in-flows. The country is alsostruggling with a bust in itshitherto bubbling propertymarket.

For the net exporters,while the prices of some ofthe most essential commodi-ties, especially agriculturaland energy products haveremained relativelyfavourable since the eurozone debt crisis, the magichas not been due to astrengthening in demand butto production and supplyfears and the activities ofspeculators. These ‘satisfac-tory’ price levels (at around$100 per barrel) explain, forexample, why OPEC has leftcrude oil production figuresunchanged since the begin-ning of the year.

But for how long will the‘satisfactory’ price levels ofthese and other commoditiesbe sustained, given the slow-ing economic fortunes inChina? For commodity ex-port dependent countries, anybad news from their biggestmarket, China, is indeed badnews.

Experts opine that Chinawill be the main determiningfactor of future of commod-ity demand and prices; first,for the size of the economywhich is now the second larg-est after the United States;and for its stage of socio-eco-nomic development whichcreates strong demand forcommodities. Also, the sheersize of its population – about1.3 billion people with a rap-idly growing middle class

makes it the key consump-tion market to watch.

A report published in TheWall Street Journal (“As ChinaGoes, So Go Commodities”by Liam Pleven; December14, 2011) places the directionof global commodities de-mand and prices at the door-steps of China: “You want toknow where the global com-modities markets are headingin the coming years? Then it’sprobably best that you re-member a single word:China”

According to the report,no single factor is likely tohave a more far-reachingimpact on commodities mar-kets over the next few yearsthan the direction of theChinese economy. If Chinamaintains its traditional fullspeed growth, demand forand prices of commoditieswill remain bullish. If the cur-rent marginal slowdown issustained, say at between 7-9percent, commodities will alsoexperience relative marketstability. But if the Chineseeconomy experiences a hardlanding, say, to the region of4- 5 percent, so will the com-

modities market. Particularlyvulnerable are commoditieshighly consumed by China,including crude oil, copper,steel, coal, among others.

A more likely scenario inthe view of most experts is amoderation in the economicexpansion of China, ratherthan a hard landing, which isgood news for commodity

exporters.Another good news for

African commodity export-ers is that several other ‘Chi-nas’ are in the offing. Emerg-ing markets such as India,Brazil, Indonesia, Russia andTurkey have the potential,like China, to boost globaldemand for commodities inthe coming years.

Source: www.online.wsj.com



Other potential factors that coulddetermine the future of commoditymarket include the outlook for tech-nological evolutions, including bio-fueltechnology; developments in financialmarkets; new investments in commodi-ties production; exchange rates dynam-ics (especially in relation to the US dol-lar); growth in global population, em-ployment, wages and urbanization; de-velopments in major commodity ex-port zones; natural factors including cli-mate change and its impacts, amongothers.

Tackling FutureCommodity Price ShocksAccording to reports by the AfricanDevelopment Bank, the commoditiesprice boom of 2008 was a major boostto Africa’s current account positionwith earnings from key exports exceed-ing outflows for imports by a whop-ping USD 319 billion that year. Butthe dramatic drop in prices that fol-lowed a year later (2009) wiped outmuch of these gains, with earningsfrom the continent’s energy exportalone falling by USD133 billion.

The nature of commodities sub-jects them to the mercy of natural andman-made factors that economic mod-els cannot easily explain away. Within

second quarter 2012 alone (March toJune 2012) crude oil prices shed awhopping 30 percent. Also, within adecade spanning 1999 to 2008, crudeoil prices rose from $10 per barrel toabout $145 per barrel, before fallingto below $40 per barrel within anothersix month period. All commodities maynot be as volatile in price as crude oil;but one feature that is common withvirtually all of them is the regular, swiftchanges in their pricing.

For the non-oil, non-agriculturalcommodities where demand in the glo-bal market is much more elastic, a re-port released by the Business MonitorInternational (BMI; UK; August 10,2012) predicts that hard times mayawait African exporters if the euro zonecrisis deepens further. This is becausedemand for and prices of these com-modities could experience a sharp de-cline. According to the report, the 10countries most vulnerable are thosethat sell more than a third of their com-modity exports to the euro zone. Theyinclude Tunisia, Congo (Republic),Equatorial Guinea, Algeria, Ghana,Côte d’Ivoire, Morocco, Mozambique,Cameroon, and Mauritius. The com-modities that would be hardest hit in-clude industrial metals such as iron,bauxite, and copper, food products,

and diamonds. Also, should the crisisworsen, countries with stronger bal-ance of payments positions wouldweather the storm a lot better. In addi-tion, countries with larger domesticmarkets and those that are relativelyisolated from the global system wouldfair better in handling the commodityprice shock than those that are highlyexternally dependent.

Commodity exporters thereforeneed to put strategies in place to guardagainst or manage price and demandfluctuations when ever they occur.

‘Saving for the rainy day’ remainsone of the options at the disposal ofAfrican commodity net exporters. Ac-cumulating assets in commodity stabi-lization funds during periods of priceboom would help absorb price shockswhen they occur. Some African coun-tries now have Sovereign Wealth Fundswhere the excess proceeds from thedifference between benchmarked com-modity price and actual are set asideto cushion the effect of future priceslumps. An African DevelopmentBank report (“Managing CommodityPrice Volatility in Africa”; September2011) discloses that only about fourAfrican countries absorbed the suddendecrease in energy exports in 2009 rela-tively well – Nigeria, Algeria, Angola,

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and Libya – the main reason being thehealthy sovereign wealth and foreignexchange reserve positions they main-tained immediately prior to the pricecrash.

Also, there is the need for struc-tural buffers that protect the econo-mies from changing market conditions.Several African economies do not havein place a commodity price risk man-agement mechanisms, leaving themperpetually at the mercy of global priceupset.

Fiscal prudence and efficient man-agement of natural resources and earn-ings from commodity exports remainanother issue to address. African coun-tries have had to struggle with the nowproverbial ‘resource curse’. Misman-agement of abundant natural resourcesnot only exposes affected economiesto periodic fiscal shock, it also provokespublic discontent, civil wars and socio-political unrests. Decades of exploita-tion of abundant natural resources insome of these countries are yet to im-pact the lives of the ordinary citizen.Rising poverty and unemployment isstill rife.

The development of a robustdemocratic structure and a governancesystem that is grassroots-based wouldgo a long way in ensuring a peacefuland conducive atmosphere for the har-nessing of Africa’s natural resources.

The age-long gene of overrelianceon single commodity export should alsobe broken. Diversification of sourcesof foreign earnings is another way oftackling the recurrence of commodityprice volatility.

Importantly, African countriesshould intensify efforts to boost re-gional trade within the continent sincemuch of their woes in the commodi-ties market arise due to influences fromthe advanced economies. An increasedtrade volume between African coun-tries would hedge some of the uncer-tainties in the global market. A newWorld Bank report published on Feb-ruary 7, 2012 captioned “De-Fragment-ing Africa: Deepening Regional Trade Inte-gration” shows how the continent is los-ing out on billions of dollars in poten-tial trade earnings annually owing tohigh trade barriers between neighbor-ing countries. The report also confirms

that it is easier for Africa to trade withthe rest of the world than with itself.

Food for Thought?There is a common misconception thatthe African continent cannot catch upwith the pace of economic develop-ment in other parts of the world withits current dependence on agriculturaland industrial commodities. But thisis a sheer delusion. Africa can in factleverage on its abundant natural wealthand huge potential in agriculture toovertake some of today’s most pros-perous regions – and in just few de-cades.

In May 2011, Citi Economist, Wil-liam Buiter identified 10 economiesthat will experience the fastest growthin the next 40 years. An African coun-try – Nigeria topped the list, followedby India, Iraq, Bangladesh, Vietnam,Philippines, Mongolia, Indonesia, Sri

Lanka and Egypt. The report predictsthat by 2050, Nigeria with a GDP ofabout US$9.5 trillion and with a yearon year growth rate of 8.5 percent willbe the 6th largest economy in the world.

Five African countries also madethe list of the 10 fastest growing econo-mies in the world in 2011: Ghana(20.1%); Liberia (9%); Angola (8.2%);Ethiopia (7.6%); Mozambique (7.5%);all driven by commodity export boom.

The outlook is promising for Afri-can commodity exporters that are ableto manage their resources sustainablyto create wealth, generate employmentand empower their citizenry while alsocreating an enabling business environ-ment that is attractive to local and for-eign investors.(* Eunice Sampson is the DeputyEditor, Zenith Economic Quar-terly)

In May 2011, Citi Economist, WilliamBuiter identified 10 economies thatwill experience the fastest growth inthe next 40 years. An African country– Nigeria topped the list, followed byIndia, Iraq, Bangladesh, Vietnam,Philippines, Mongolia, Indonesia, SriLanka and Egypt. The report predictsthat by 2050, Nigeria with a GDP ofabout US$9.5 trillion and with a year

on year growth rate of 8.5 percent willbe the 6 th largest economy in theworld.

Five African countries also made thelist of the 10 fastest growing econo-mies in the world in 2011: Ghana(20.1%); Liberia (9%); Angola (8.2%);Ethiopia (7.6%); Mozambique (7.5%);all driven by commodity export boom.


GLOBAL WATCH | European Debt Crisis:Beyond the concerns for GREECE


Issues (

I)

jury being meted out to our dear coun-try through the instrumentality of un-scrupulous Nigerians who want to getrich quick without going through themill. These are the “Yahoo Boys” whoare involved in Advance Fee Fraud,alias “419”. At the international level,the vast majority of Nigerians, who arehonest and transparent both in wordsand in deeds, have suffered and havecontinued to suffer undeserved stigmaand credibility damage as they are dailysubjected to security surveillance andscrutiny around the globe.

In other words, outside Nigeria,every Nigerian has become a suspect,even without a remote prospect of anytrial whatsoever! It is that serious. Cu-riously, this international stigmatizationis apparently not diminished by the factthat foreign nationals enter into thesedubious transactions with their two eyeswide open, as a result of which theyget their fingers burnt, hence they areno less guilty than the alleged initiators.

Having extensively ex-rayed theenabling environment, motivating fac-tors, operational modalities and mind-bending schemes employed by theseconmen in the previous edition, we shallnow turn our attention to this interna-tional perspective. Here, we shall lookat the success rate, contemporary de-velopments, international cooperationas well as the commendable response

by the government of Nigeria to thechallenge posed by Advance FeeFraudsters.

(A) SCAMMING AND ITSINTERNATIONALCONSEQUENCES

(i) SUCCESS RATEAlthough empirical and verifiable dataon the actual success rate recordedby con artists is not readily available,it is generally agreed that experienced‘419’ scammers get one or two repliesfor every one thousand messages orletters from which some thousands ofdollars are made, if successfully ex-ecuted. It is obvious that the business

would not have continued to thrive ifthe people involved in it are not get-ting reasonable returns on their invest-ment.

• A good example which is oftencited is that of Nelson Sakaguchi, adirector of the Brazilian bank BancoNoroeste who is alleged to have trans-ferred hundreds of millions of USdollars to Nigerian scammers. This wasarguably the third biggest haul in bank-ing history after Nick Leesons ‘exploits’at Barings Bank and the scandalouslooting of the Central Bank of Iraqon the heels of the US invasion.

• There was also the case of oneJanella Spears who was successfullyscammed in 2008 by a Nigerian conartist and she transferred $400,000.Against the advice of her family, law

n the last edition of this serial,which has been appropriately re-christened ‘Agenda For Develop-ment’, we tried to draw attentionto the very devastating image in-I

* By Chuks Nwaze

... outside Nigeria, every Nigerian has become asuspect, even without a remote prospect of any trialwhatsoever! It is that serious.


ISSUES (I) | Agenda forDevelopment: Advanced Fee Fraud (2)

enforcement agents as well asbank staff, she fell for an e-mail that informed her aboutinherited money from her lostgrandfather. Apparently, thescammers had done their re-search well because she, in-deed, had a grandfather whosedescription and initialsmarched the ones on the e-mail.

(ii) KIDNAPPING OFVICTIMSIn the process of beingscammed, some victims havealso been kidnapped and thisis part of the collateral risksthey are exposed to, in addi-tion to the fundamental un-certainty inherent in their du-bious ambition of attemptingto reap where they have notsown. Examples include thefollowing:

• In July 2001, Joseph Raca, aformer mayor of Northampton inEngland was kidnapped byscammers in Johannesburg inSouth Africa. Raca was releasedwhen the captors became nervous.

• A Romanian, Danut Tetrescu,who went from Bucharest toJohannesburg to meet with conmen, was kidnapped in 1999 andheld for $ 500,000.

• Scammers kidnapped a Swed-ish businessman in Lome, Togo for$500,000 from 2nd to 12th June,1996. There was intense negotia-tion between Swedish police andthe kidnappers before the victimwas released.

• A wealthy Japanese business-man, Osamai Hitomi, was alsolured to Johannesburg in SouthAfrica in a scam deal and kid-napped on September 26, 2008.Seven of the scammers were sub-sequently arrested after they took

him to Alberton, South ofJohannesburg and demandeda $5 million ransom from hisfamily.

• Kenth Sadaaki Suzuki, aSwedish was on 23 Septem-ber, 2008 lured to South Af-rica by a notorious scam syn-dicate and kidnapped. Afterbeing robbed of all his be-longings, a ransom of C20,000 was still demandedfrom his family. This samesyndicate was linked to the kid-napping of three Americans;some of the members werearrested in another operation.

(iii) DEATH / MURDEROR PHYSICAL HARMCon artists, their collaboratorsand even innocent citizenshave had to pay the supremeprice for the crime. Some vic-tims too, have gone the same

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ISSUES (I) | Agenda forDevelopment: Advanced Fee Fraud (2)

way for their greed and gullibility. Apartfrom victims who travel to Nigeria invain in their bid to trace their money,others who are unable to cope with theloss have committed suicide.

• Jiri Pasovsky, a scam victim fromthe Czech Republic, shot and killedMichael Lakara Wayid, a staff of theNigerian Embassy in Prague in 2003after the Nigerian Consul- Generaldeclined to refund the sum of $600,000which Pasovsky paid to a Nigerianscammer.

• A Senior Technician at AngliaPolytechnic University in England,Leslie Fountain, set himself ablaze anddied in November, 2003, after fallingvictim to a scam.

• An American living in South Af-rica hanged himself in Togo after be-ing defrauded by a Ghanaian ‘419’ conman in 2006.

• In 2007, a Chinese student atthe University of Nottingham, killedherself when she became aware that

she had been defrauded through a lot-tery scam.

• According to United States De-partment of State Bureau of Interna-tional Narcotic and Law EnforcementAffairs, between 1994 and April 1997,‘419’ scammers murdered a total of15 people, including an American whowas killed in Nigeria in June, 1995 af-ter being lured by a ‘419’ scam.

• In September 1999, Kjsetil Moe,a Norwegian businessman was initiallyreported missing but subsequentlykilled after a ‘deal’ with Nigerianscammers in South Africa.

• In December, 2004, one GeorgeMakronalli, a Greck national was alsokilled in South Africa when the syndi-cate discovered that his family declinedto pay the ransom requested.

(iv) PSYCHOLOGICAL ANDEMOTIONALCONSEQUENCESIt is yet unclear the extent of chemis-try or level of bonding that existsbetween con men and their victimswhich makes it possible for the victimto continue to contact the scammereven when he has been shown ampleevidence that he is being defrauded. Itis obvious, however, that the victim isusually drawn so deeply into an intri-cate web of deception that

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EDITORIAL TEAM - Zenith Bank - In your best interestto grow geometrically while food production would increase only arithmetically. At this time, the revered Malthus neither ... your