As the year draws to an end, many banks have increased interest rates charged on loans to between 27 and 30 percent from about 20 percent because of the increase in the cost of deposits and the need to shore up their balance sheet position before the end of the year.
Business Day investigations showed that many of the banks are under pressure to raise their own funds for onward lending in an already almost illiquid market.
This has thus led to banks dangling enticing carrots to attract more deposits. The result is that banks are paying higher to get money.
Not even the newly reviewed discount window operations offered by the Central Bank of Nigeria (CBN) will lure banks to approach the apex bank, as lender of last resort for cheaper funds.
The fear is that if the banks approach the CBN regularly for funds, they could be seen as having a confidence problem which has prevented them from raising funds from the open market and thus indicate that all is not well with such banks.
So, even when cost of funds in the market remains high, the banks are not keen to approach the CBN, which is the lender of last resort for fund. 
Emmanuel Abolo, chief economist of Bank PHB said in a telephone chat that what is happening may not only be as a result of the increasing cost of fund, but as well as the cost of running the business amongst others.
He said, the chief cause of the increase in lending rate was the fact that banks were presently shoring up their balance sheets to put them in good standing as the year runs out. This is particularly so for those banks which officially close their financial year on December 31 . 
The implication of this is that, banks will not have enough to lend to one another as each is trying to make its books look good.
This is manifest in the daily Nigerian Inter-Bank Offer Rate (NIBOR) which has continued to rise in the last two to three weeks as a result of illiquidity amongst banks. Not even the maturity of tenured treasury bills has been able to inject reasonable liquidity into the system.
Wale Abe, chief executive officer of the Money Market Association of Nigeria (MMAN) also agreed that the increasing cost of funds is mostly responsible for the increase in lending rates.
According to him, illiquidity continues among banks, while the high cost of funds has to be passed on to the borrowers, as banks are no charity people.
Both Abe and Abolo agree that, though the Monetary Poliy Rate (MPR) is supposed to be an anchor or rallying point for interest rates, the reality on ground is a different thing altogether.
In spite of the reduction in MPR recently by the Monetary Policy Committee (MPC) to 9.75 percent from 10.25 percent recently, a letter sent to a bank’s customer recently said: “As a result of the current happenings in the financial market, inflationary trend in the economy is rising and this has shot up the cost of funds in the market….. We are constrained to inform you of a slight review in the existing interest rate on your account to 28 percent.”

The stock market crisis has taken its  toll on majority of  companies that were listed on the Nigerian Stock Exchange (NSE) this year, causing them to post negative returns as at the end of the third quarter ended September 30, 2008.
Analysis of the stock’s performance by FSDH Research showed that out of the 18 stocks that were listed between January and September 26, 2008, four stocks, including Dangote Flour Mills plc, Chams plc, Nigerian Bags Manufacturing Company plc (Bagco) and Skye Shelter Fund plc, closed the third quarter in the positive territory. Fourteen other stocks were consumed by the crisis that had been rocking the market since March.
A cursory look at the table showed that Dangote Flour posted a net gain of 20.57 percent having closed the period under review at N18.99 compared with N15.75 at which it was listed. Newly listed chams plc and Union Diagnostic followed with total returns of 20 percent and 17.33 percent respectively. Chams plc had moved from its listing price of N2.50 to N3.02, while Union Diagnostic rose from N3.00 to N3.52.
Omatek plc tops the list of companies with negative returns with 51.95 percent having lost N2.67 from its listing price of N5.14 to close the period at N2.47, followed by Invetment and Allied Insurance with 44.85 percent from N1.36 to N0.74. Starcomms posted a loss of 43.89 percent in terms of total returns on investment as it closed the quarter at N8.04 against its listing price of N14.33.
According to the analysts, the equities segment of the Nigeria’s financial markets ended the nine months on a bearish note, as the major indicators were down and activities in the market recorded one of the lowest levels in recent years. 
The market witness an appreciation in the first quarter of 2008, as it gained 8.89 percent in first quarter of the year to close at 63,016.56 points.
However, as at half-year 2008, the NSE All-Share Index recorded a negative return of 3.52 percent to close at 55,949 points.
“Cumulatively, the equities segment of the Nigeria financial market recorded a loss of 20.3 percent as at the end of September 2008. The loss was against our forecast growth rate of 13.51 percent for second quarter, 2008 as contained in our ‘FSDH Economic and Financial Market Review for Q1, 2008 and Outlook for Q2, 2008’. 
Some of the factors responsible for the bearish trend recorded during the first nine months of the year, according to market watchers, include inconsistent policy pronouncement by regulatory authorities which the market reacted to negatively, portfolio re-alignments to primary market from secondary market (both private placements and public offers and initial public offers) from where investors were previously recording over 100 per cent return and a switch of portfolio in favour of fixed income assets, particularly fixed deposits in order to enjoy the high deposit rates that banks offered to aggressively mobilise deposits in preparation for the terminated uniform year end.
Others include misconceptions about the margin facilities offered by banks to capital market operators, which subsequently led to massive sell-off, the initial plan of the Securities and Exchange Commission (SEC), to increase the capital base of the capital market operators and the current global final crisis which started in the US and multiplied across the globe.
However, it was observed that the quarterly and full year results that quoted companies on the NSE have been releasing recently have been very impressive. 
“The good results showed improved earnings and have led to high earnings yield, impressive dividend yields and unbelievable low price-earnings ratios. This has caused companies with good fundamentals and prospects for growth in the market to look more attractive and grossly undervalued for long term investors at the prevailing market prices”.
FSDH noted that while liquidity is critical to rescue the market from the current lull, the level of undervaluation of companies that have good fundamentals and have prospects for growth in the market may attract some liquidity into the market.
“Looking at the declining aggregate value trends in the market in the last five months, the amount of money that would be required to change the fortune is very low compared with what it was one year ago. We believe that the market should pick up as soon as there is clear direction on policies that affect the market.
“The recent trend portends that the market may remain flat for the remaining part of 2008". 
Meanwhile, FSDH observed that the market may experience isolated demands for some stocks and consequently sparks in their share prices within a short period of time during the remaining part of the year.
“We advise that this is not the time to exit the market, but a time to strategically seek for value stocks from which medium and long term return can be recorded. We remain optimistic that the equities segment of the financial market may reward investors for the current losses in the first and second quarter of the year 2009”.
Also, looking at the level of undervaluation in the market as a result of the current bearish trend, the firm recommend that any medium to long term portfolio should be skewed in favour of equities ‘in order to benefit from the bull run which is around the corner’.

Equity trading which witnessed a change from last  week Wednesday continued on the upward trend during the first trading day of the week as confidence has started to return into the market.  Specifically, 59 stocks appreciated in price on Monday, higher than the 53 stocks last week Friday. While 25 stocks depreciated in price lower than the 30 stocks last Friday.
Guinness Nigeria plc led on the gainers chart with a gain of N4.07 to close at N85.60 per share. Trading in the stocks produced a turnover of 385,162 units of shares worth N132.7 million exchanged by investors in 96 deals. While Nigerian breweries plc followed with a gain of N1.79 to close at N37.66 per share. Its traded 369,194 shares valued at N13.904 million in 40 deals.
On the other hand, Chevron oil plc led on the losers chart dropping by N15.57 to close at N295.84 per share while Oando plc followed with a loss of N7.30 to close at N138.81 per share.
Meanwhile, market capitalisation of the first-tier equities recorded 1.9 per cent change to close on Monday at N7.672 trillion while the NSE all share index showed 1.8 to close at 34,973.05 on Monday.
The Banking sub-sector was the most active on Monday with a turnover of 167.51 million shares valued at N1.7 in 5,171 deals. Volume in the banking sub-sector was largely driven by activity in the shares of Access Bank plc, trading in the shares accounted for 33.23 million shares valued at N268.95 million in 557 deals. 
Insurance sub-sector boosted by activity in the shares of Investment and Allied assurance with a turnover of 8.3 million valued at N4.143 million in 75 deals. Overall volume of share traded stood at 349.320 million with capitalisation of N2.65 billion and exchanged in 9,044 deals.

The economic outlook  for last quarter 2008 is high, given the various rescue mechanisms being put in place by countries to hedge against risks facing the global economy amidst the global financial meltdown. The assertion by Deloite economists is optimistic as a result of the salvaging effects of government efforts.
According to the Deloitte Touche Tohmatsu Global Economic Outlook 4th quarter report, the speed and size of the various governmental rescue efforts will result in a recovery in the nearest future.
Their prediction is that, although developed country economies will continue their serious downturns, the massive infusion of government money should restore activity to the credit markets and set the stage for recovery. 
It would be recalled that governments of some developed economies have responded by embarking on measures that will save their banks and financial institutions from crumbling, while reducing the loss of investor funds.
The intervention in the developed world involves higher amounts of funding. The developing countries, on the other hand, said to be only indirectly affected by the crisis, are also following suit with similar policies, although in smaller amounts.
Thus, the governments of major economies have made efforts to coordinate their policy responses to the crisis, and have introduced unprecedented and strong market stabilisation measures.
In the United States, a US$700 billion rescue package has been drawn in a bid to salvage its financial institutions. While presenting the bill to the country’s Congress for approval, President George Bush had noted the severity of the situation, cautioning that the current crisis could “wipe out banks, empty retirement nest-eggs, send home-values into a free-fall and create millions of new jobless.”
In the United Kingdom, state intervention in recent days has been on an unprecedented scale, with a £500bn bail-out of the UK financial sector and plans to partly nationalise US banks and coordinated global interest rate cuts. 
Together, Germany, France and the United Kingdom announced more than 163 billion euros ($222 billion) of new bank liquidity and 700 billion euros (nearly $1 trillion) in interbank loan guarantees, all geared towards cutting the Europe-wide cost of the subprime which has been estimated at $323.3 billion in asset write-downs. 
The Korean government has also intervened in its financial market by providing guarantees to Korean banks’ external debt, among other measures. 
Korean total guarantees were capped at USD 100 billion to cover Domestic banks’ external debt, reaching maturity until the end of June, 2009, which is estimated to be around USD 80 billion.
Other measures by the government and the Bank of Korea include providing additional dollar liquidity amounting to USD 30 billion to the banking sector by utilising foreign exchange reserves, purchasing of RPs, buying government bonds and early redemption of monetary stabilisation bonds. 
In Nigeria, debates have ensued as to the need for a bail-out as government earlier announced a N400 billion measure to fuel liquidity in the system, with controversies surrounding the need for a bailout of banks.
This is despite reports on the calls by banks’ chief executives on the Federal Government to directly bail out these banks.
Following historical precedents of financial crises in Norway, Finland, Sweden, and Japan in the 1990s, as well as the United States during the savings and loan crisis, Deloitte posits a positive outlook from the financial crisis. It suggests that bank recapitalisation can be beneficial to economies, and that the financial burden on taxpayers is not necessarily onerous. It notes that economic downturns triggered by financial crises tend to be deeper and longer than those that start for other reasons.  
“Unlike some past financial crises, this one resulted in a rapid and massive governmental response on both sides of the Atlantic,” said Ira Kalish, director of Global Economics, Deloitte Research. “Thus, there are reasons we can be cautiously optimistic about the medium-term outlook for the global economy.”
The report offers a long-term view, suggesting impacts in multiple business sectors. “The credit crunch is part of a long-term restructuring of the economy,” said Kalish. “The result will see a shift in the U.S. economy away from a consumer-driven import base to an export-based economy. Asia on the other hand, will develop as more consumer-based economies. This creates opportunities and challenges for business across industry sectors.”
“In the United States, recapitalisation of banks will help to revive credit market activity,” continued Kalish. “Eurozone banking consolidation will have a positive long-term impact on European capital market efficiency. Finally, the emerging economies of Russia, India, and China, while slowing, will remain important drivers of global growth, to which experts have said that Nigeria has a chance to position itself among these economies with its Vision 2020 drive.