The Nigerian equities market returned to positive territory last week as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) rose by 0.40 per cent compared with a decline of 0.39 per cent the previous week.
Despite the release of poor quarterly corporate performance by some companies, investors ignored those results and took position ahead of dividend payment for the year ended December 31, 2016.
Consequently, the NSE ASI and market capitalisation appreciated by 0.40 per cent to close the week at 26,328.22 and N9.059 trillion respectively. Similarly, all other Indices finished higher during the week with the exception of the NSE Premium Index that depreciated by 0.13 per cent. Investors were upbeat last week, with the NSE ASI recording gains in four out of the five sessions.
Daily Market performance
Trading resumed for the week last Monday market yesterday resumed the week on a positive note as the NSE ASI appreciated by 0.03 per cent to close at 26,231.37. Market analysts at Meristem Securities Limited, attributed the positive trading to gains by large capitalised stocks.
“We attribute the day’s performance to the positive sentiments in the market, specifically on some large cap stocks. We expect this trend to continue into the week, as we anticipate more bargain hunting activities on counters trading below their intrinsic values,” they said.
A total of 19 stocks appreciated compared with 15 that declined in value. UACN Property Development Company (UPDC) Plc led the price gainers’ chart, advancing by 4.86 per cent to close at N3.02 per share.
UPDC is planning to raise about N5 billion from the capital market through a rights issue of 1.719 billion ordinary shares of 50 kobo each at N3.00 per share on the basis of one new share for every one share already held.
The second day of the week witnessed a bearish trading with the index shedding 0.05 per cent to be at 26,217.54. Similarly, market capitalisation shed N4.8 billion to close at N9.0 trillion.
Shares tanked as the Central Bank of Nigeria’s Monetary Policy Committee (MPC) retained the Monetary Policy Rate (MPR) at 14 per cent. The MPC, which met on Monday and Tuesday voted unanimously to maintain status quo by retaining the: MPR at 14 per cent; Cash Reserve Ratio at 22.5 per cent and Liquidity Ratio at 30 per cent.
However, market operators said retaining the MPR at 14 per cent will make the fixed income securities remain more attractive to investors than the equities market.
Analysts at Meristem Securities Limited, said: “Given that the MPC maintained the status quo on all policy variables, we expect the weak market mood will continue to dictate the direction of activities in the equities market. However, we advise investors to continually assess the market for opportunities to take positions in fundamentally justified stocks ahead of the full year 2016 earnings season.”
Seven-Up-Bottling Company Plc and Custodian and Allied Plc led the price losers, depreciating by 4.9 per cent each to close at N101.40 and N3.63 respectively. NCR Nigeria Plc and NAHCO also shed 4.9 per cent apiece, just as Sterling Bank Plc and Transcorp Plc went down by 4.8 per cent and 4.7 per cent in that order.
On the positive side, Cement Company of Northern Nigeria Plc led the price gainers with 5.0 per cent to close at N4.62 per share. UAC of Nigeria Plc followed with 4.9 per cent, just as NPF Microfinance Bank Plc appreciated by 4.6 per cent.
In terms of sectoral performance, the NSE Banking Index, which had outperformed other sector indices for the most part of the year, dipped 1.1 per cent as investors booked profit in Zenith Bank Plc (-3.5 per cent) and United Bank for Africa Plc (-1.2 per cent).
The bulls regained control of the market on Wednesday even as investors staked N2.434 billion on 190 million shares in 2,896 deals.
The bulls pushed the NSE ASI to close 0.09 per cent higher at 26, 240.45.
The recovery in the market was attributed to the activities of bargain hunters who swooped on shares, making 21 equities to close higher while 16 declined. NASCON Allied Industries Plc led the price gainers with 4.9 per cent trailed by Neimeth International Pharmaceuticals Plc with 4.6 per cent. Custodian and Allied Plc appreciated by 3.3 per cent, just as Oando Plc chalked up 2.3 per cent.
Conversely, Honeywell Four Mills Plc, Livestock Feeds Plc led the price losers with 4.9 per cent apiece. A.G Leventis Plc and UACN Property Development Company Plc shed 4.6 per cent each.
Sectoral performance indicates that only the NSE Banking Index depreciated by 0.08 per cent. The NSE Oil/Gas Index appreciated by 0.49 per cent, while NSE Industrial Goods Index, NSE Insurance Index and NSE Consumer Goods Index grew by 0.41 per cent, 0.14 per cent and 0.04 per cent.
The market sustained its positive performance for the second straight day on Thursday with the NSE ASI going up by 0.2 per cent. Interest showed by bargain hunters in Guaranty Trust Bank, Forte Oil Plc, Zenith Bank Plc, Oando Plc and Stanbic IBTC Holdings bolstered the bullish trading. Apart from the NSE ASI that appreciated by 0.2 per cent, market capitalisation of equities added N17 billion to close at N9.0 trillion.
It was mixed blessings for investors in Stanbic IBTC and Guinness Nigeria. While Stanbic IBTC rose by 1.1 per cent following news of smooth management changes, those in Guinness suffered a depreciation of 5.0 per cent. Guinness reported a N4.6 billion loss after tax for the six months ended December 31, 2016. Commenting on the results, Managing Director/Chief Executive of Guinness Nigeria, Mr. Peter Ndegwa, attributed the poor performance to the challenging economic environment and high finance charges.
Ndegwa said: “We now have both International Premium Spirits (IPS) and locally manufactured mainstream spirits within our portfolio and these contributed to revenue growth for the half year. Our accessible beer brands also continue to grow strongly.”
The equities market sustained the positive tempo on the last trading session for the week as the NSE ASI rising by 0.15 per cent to close at 26,2328,22 compared to an increase of 0.19 per cent recorded the previous day. Similarly, the market capitalisation increased by 0.19 per cent to close at N9.058 trillion. The marginal rise in the index and market cap were prompted by appreciation in the share prices of Total, Nestle, Seven-Up Bottling Company Plc, Zenith Bank and Stanbic IBTC. The value of equities traded also increase by 84.71 per cent to N2.194 billion from N1.187 billion transacted previously. The total volume of equities traded rose by 62.33 per cent to 238 million in 2,725 deals.
Market turnover
In all, investors traded 990.584 million shares worth N18.823 billion in 14,917 deals last week by investors on the floor of the exchange, compared with a total of 1.340 billion shares valued at N8.903 billion that were traded the previous week in 15,733 deals.
The Financial Services Industry led the activity chart with 664.647 million shares valued at N3.896 billion traded in 8,056 deals; thus contributing 67.10 per cent and 20.70 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 133.641 million shares worth N2.602 billion in 2,653 deals. The third place was occupied by Conglomerates Industry with a turnover of 63.189 million shares worth N88.834 million in 635 deals.
Price gainers and losers
Meanwhile, 29 stocks appreciated last week lower than 30 equities of the previous week. Conversely, 30 equities depreciated in price, higher than 27 equities of the previous week. Unity Bank Plc led the price gainers with 15.6 per cent, trailed by Oando Plc with 12.4 per cent. Stanbic IBTC Holdings Plc and Champion Breweries Plc garnered 8.5 and 8.3 per cent respectively. Other top price gainers included: Forte Oil Plc (8.1 per cent); Wema Bank Plc (7.8 per cent); NPF Microfinance Bank Plc (6.6 per cent); Total Nigeria Plc (6.4 per cent); Neimeth International Pharmaceuticals Plc (4.2 per cent) and Seplat Petroleum Development Company Plc (4.1 per cent).
On the contrary, Honeywell Flour Mills Plc led the bears, shedding 11.3 per cent, trailed by MRS Oil Nigeria Plc with 9.7 per cent. Sterling Bank Plc went down by 8.7 per cent, while Caverton Offshore Support Group Plc declined by 8.0 per cent. Livestock Feeds Plc and Transnational Corporation of Nigeria Plc went down by 6.9 per cent apiece just as A.G. Leventis Nigeria Plc, Custodian and Allied Plc, Nigerian Aviation Handling Company Plc and Trans Nationwide Express Plc lost 5.7 per cent, 5.2 per cent and 5.0 per cent in that order.
Med-View Airlines is set to go public tomorrow to tap into the anticipated growth of domestic airlines operations in the country, The Guardian has learnt.
The airline, being one of the two flag carriers of Nigeria, will be “Listed by Introduction” on the Nigerian Stock Exchange (NSE) on January 31, 2017, would be the first airline to list its shares on the stock exchange in the last 10 years.
By the listing and sales of shares to members of the public, the airline would have access to the needed capital inflow to run more efficiently and improve confidence of investors. Besides, shareholders would also have a say in the running of the airline, while the risk of ownership is spread among the shareholders as well.
Sources at the stock exchange hinted that Med-View Airline would be listing N9.75 billion ordinary shares of 50 kobo each at N1.50 per share, indicating a start-off market capitalisation of N14.63 billion. Executive Director, Business Development, Med-View Airline, Isiaq Na-Allah, said that this the growth projection and market forecast informed the airlines’ decision to be listed on the Nigerian Stock Exchange to give members of the public the opportunity to be part of the airline through share holding.
The yearly passenger traffic currently put at 15 million nationwide has been estimated to improve with the Federal Government’s plan to concession airports nationwide.
The Minister of State for Aviation, Hadi Sirika, the chief advocate of airport concessioning, recently quoted figures from the International Air Transport Association (IATA), International Civil Aviation Organisation (ICAO) and others, showing that the sector is growing at the rate of five per cent per annum and doubling every 15 years.
Sirika said once the potential of air transport business in Nigeria is well harnessed, “the figures will quadruple; multiply four times, which means that from the onset, once these airports are in place and the carriers are flying, we will multiply 15 by four and that is 60 million passengers.”
Industry watchers described the move by Med-View as a bold step and smart move in the right direction, to improve their chances of becoming a major player in the industry and also in the anticipated boom.
Abayomi Adegbite, an engineer, said that the public listing would put an end to “the era of one-man management board” that has the bane of most of the airlines and their weakling posture.
Adegbite and others were unanimous that in addition to the prestige a company gets with listing on a stock exchange, the company will be able to raise additional funds through the issuance of more stock to emerge stronger and stock options programmes can be offered to potential employees, making the company attractive to top talent. Listing companies also have additional leverage when obtaining loans from financial institutions.
The Guardian learnt that Kedari Capital Limited and Trustyields Securities Limited are the financial Advisers/issuing House and Stockbrokers to Med-View Airline in respect of the listing exercise.
Spokesperson of the airline, Obuke Oyibotha, noted that the airline’s forays into pilgrims airlift has revolutionised pilgrims handling and airlift in Nigeria and the West African sub-region.
“Today, Med-View is the benchmark and the airline of choice when it comes to Hajj operations in Nigeria. The National Hajj Commission of Nigeria (NAHCON) ranks Med-View number one for hitch-free hajj operations.
The Central Bank of Nigeria (CBN) yesterday disclosed that it recently queried some commercial banks that forwarded inaccurate data on their returns on foreign exchange (FX) utilisation which it had erroneously published. Although the CBN did not reveal the names of the affected banks, it pointed out that some of the financial institutions had returned a response indicating that some of the figures were related to formatting errors which did not affect the actual rates of the reported transactions. The acting Director, Corporate Communications, CBN, Mr. Isaac Okoroafor, in a statement said the clarification became necessary following media reports alleging irregularities in the rates at which FX was obtained by some individuals and companies from different banks under the new FX policy by the central bank which prioritises FX sales to manufacturers, agriculture, plant and machinery, critical raw materials, among others. The statement explained that the central bank neither allocates FX nor does it deal directly with banks’ customers. In addition, it stated that the CBN did not fix FX rates for transactions by individuals or companies; and that in line with its principle of transparency, it directed banks to forward to it, evidence of FX sale to end users and to advertise same in national dailies.
The CBN said: “Since the introduction of the new FX Policy in 2016, we have published, monthly, the evidence of sale from deposit money banks (DMBs), as received from the banks and without any alteration by us in the spirit of transparency. We have recently observed, however, that some DMBs forwarded inaccurate data, which were erroneously published and gave a wrong impression of disparate rates; “The DMBs involved in providing inaccurate data have since been issued queries accordingly. Some have returned a response indicating that some of the figures were related to formatting errors which do not affect the true rates of the affected transactions. As the constitutionally authorised industry regulator mandated to manage the foreign exchange market, maintain external reserves and to safeguard the international value of the legal tender currency, we wish to state unequivocally that the CBN has a duty to perform and would not indulge in acts capable of discrediting the foreign exchange market.
“We therefore wish to reiterate that the sale of foreign exchange under the new policy is most transparent and is not intended to benefit any individual or corporate body in anyway. While we appreciate the concerns of stakeholders, we urge all concerned to verify information on matters relating to the Bank and use our available channels to lodge their complaints.” 30% of oil sector loans may default in 2017 Meanwhile, a report by CSL Stockbrokers Limited has estimated that 30 per cent of lending to the oil sector may default in 2017 if production remains low on account of pipeline vandalism and if the use of alternative evacuation methods is not successful. This, however, is in spite of the fact that a significant portion of banking sector loans to the oil and gas sector had been restructured. The report also stressed that beyond the grace periods for the restructured loans, problems might well recur unless production level improved after the repair of damaged infrastructure and the ability of the federal government to reach a truce with the Niger Delta militants. Consequently, the 2017 banking sector report by the Lagos-based firm titled: “Asset quality: overall picture still bearish,” estimated that the banks covered in the report would see an average cost of risk (CoR) estimated at 11.23 per cent in the oil and gas sector, by the end of 2017, as opposed to its base case 2017 forecast of 2.54 per cent. The banks covered in the report included FBN Holdings, Zenith Bank Plc, United Bank for Africa Plc (UBA), Guaranty Trust Bank, Access Bank, Diamond Bank, Fidelity Bank, and Sterling Bank.
Several banks had made loans to the oil and gas sector. These loans included significant sums lent to indigenous oil and gas companies to purchase marginal oil fields from the international oil companies (IOCs). Indigenous oil producers operate onshore fields that require infrastructure in the Niger Delta for exports but the militancy in the Niger Delta has damaged major pipelines and other infrastructure. The consequent drop in sales has negatively impacted the finances of domestic companies. According to the report, the current oil price of about $55.39/bbl, which in most cases covers operating costs but not all finance costs, and the return of violence to the Niger Delta implied a significant strain on the cash flow of indigenous oil and gas companies going into 2017 and consequently inability to service their bank loans. “Some of these companies are also significantly leveraged and in such cases even resumption of oil exports and an increase in oil prices to $70/bbl will not significantly improve their cash flows. Currently, the highest risk lies with the upstream oil and gas segment particularly loans to the indigenous oil and gas companies. We however see potential risk in the downstream sector and the oil and gas servicing segments. “A strain on the finances of the upstream oil and gas sector companies implies a strain on oil and gas servicing companies as contracts awarded and rates on jobs drop in accordance with the drop in revenues of major IOCs. The oil servicing companies however have been staying afloat due to the fact that for most contracts awarded to them, 60 per cent of their earnings come in dollars, while the remaining 40 per cent are paid in naira. With the naira devaluation, converting these revenues to naira, have partly,” it added. In its review of the manufacturing sector, the report noted that as a result of the significant depreciation in the nation’s currency, manufacturers also had to face rising input costs amid an economic crunch resulting in declining demand. Consequently, loans to that sector are now considered high risk by banks in their view. The report did not envisage an improvement in the manufacturing sector in 2017, at least not in the first half of the year. “Indeed we believe things may even get worse in the coming months without some intervention from the federal government. The measures taken so far have not been effective in keeping the sector’s output from declining hence we have little confidence that things will change in the near term. With the current scarcity of foreign exchange at the interbank, except this is addressed by the CBN, we believe manufacturers will still largely depend on the parallel market for their FX needs. “We believe the naira in the parallel market is unlikely to settle below N450 in 2017, hence we view the likelihood of a decline in input costs unlikely. While we believe the manufacturing sector will continue to take priority with the Nigerian government, a crisis in the sector is nevertheless a possibility that requires assessment,” it added.
The Central Bank of Nigeria on Thursday stated that no amount of criticism and blackmail from “self-centred individuals” would make it change its current flexible foreign exchange rate policy.
The apex bank said this in a statement titled: ‘Nigeria’s current economic situation: Our case’, signed by its Acting Director, Corporate Communications Department, Mr. Isaac Okorafor.
The bank said while it was not opposed to the fact that Nigerians had the right to express their views, majority of such views had become attacks on its policy rather than proffering solutions.
The statement read in part, “The Central Bank of Nigeria has observed with great concern the continued and unwarranted attack on its policies by a group of Nigerians, whose real interests, findings have shown, are anything near altruistic, but rather self-serving and unpatriotic.
“While we respect the rights of every Nigerian or stakeholder to their respective views, we find it curious that certain interests have remained persistent in their move to misinform the larger public, with the intention of discrediting genuine efforts at managing the economy, thereby creating public distrust and panic within the financial system.
“Indeed, self-centred individuals, who have failed to assail our patriotic position, have resorted to the sponsorship of serial propaganda to misinform and mislead the public on the objectives of our policies.
“Intelligence reports at the disposal of the bank reveal the involvement of some unpatriotic elements funding the push to have the CBN and the Federal Government reverse its forex policy, which is aimed at conserving foreign exchange, stimulating agriculture and manufacturing, and also promoting exports.”
The apex bank said the present economic challenges facing Nigeria were worsened by the country’s past practice of frittering away huge earnings made from oil sales over the years.
The statement added, “As we have explained on several occasions, our decisions on forex management are prompted by the challenge posed by the level of depletion of the country’s reserves, arising from issues such as a drastic reduction in oil earnings, speculative attacks and round-tripping.
“It is pertinent to note that pressures on the country’s foreign reserves have persisted due to a huge fall in the monthly foreign earnings, which fell from over $3.2bn sometime in 2013 to below $500m per month sometime in 2016, when the demand for the US dollar, particularly by importers, continued to rise considerably.
“In spite of the challenges and the basic economic fact that countries earn dollars from international trade, we have ensured we meet the genuine demand of importers to pay for eligible imports and other transactions within available resources.”
It explained that in line with its mandate and working with the fiscal authorities, the management of the CBN would continue to ensure monetary and price stability as well as maintain the external reserves to safeguard the international value of the naira.
“While leaving our doors open for genuine partnership with all our stakeholders, we will only take economic decisions that will impact positively on the lives of all Nigerians,” it added.
The country’s external reserves increased by 12 per cent within a period of three weeks, it has been learnt.
The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, had on Tuesday said the country’s external reserves had hit $28.9bn.
This means that the reserves have increased by $3.1bn within the first three weeks of this year. This is approximately a 12 per cent increase when compared to the $25.8bn the reserves recorded on the last day of 2016.
However, on the CBN website, the reserves rose to $27.82bn on January 25 from $27.76 on January 24, after hitting $27.69 on January 23.
The country’s foreign exchange reserves had increased to $27.49bn on January 20, according to the statistics.
The external reserves rose by 8.9 per cent month-on-month to $27.49bn on January 20.
Year-on-year, the reserves however recorded a decline of 3.17 per cent compared to January 2016.
The CBN has yet to provide any reason for the recent rise in reserves, although it may be due to the rise in global oil prices and production levels.
The reserves had risen by 15 per cent or $3.6bn from $23.8bn recorded on October 19, 2016 to $27.4bn on January 19.
This year alone, the foreign exchange reserves have risen by $1.9bn or 7.4 per cent.
The Group Managing Director, Afrinvest West Africa Limited, Mr. Ike Chioke, said the recent accretion in the external reserves was due to both increase in oil prices and production output as well as slowdown in foreign exchange allocation by the CBN.
“Yes, there have been increases in the external reserves but we are not paying our bills. Take for instance if you settle the $4bn obligation, we will be down again to about $23bn,” he said during the release of the investment advisory firm’s economic outlook for 2017 on Tuesday.
The country’s external reserves, which have been increasing significantly in recent months, had risen to $27.3bn on January 17 after hitting $26.9bn on January 13.
Within a period of 11 days, the reserves increased by $1bn, rising from $26.3bn on January 6 to $27.3bn on January 17, according to the central bank’s statistics.
Between December 30, 2016 and January 12, 2017, the foreign exchange reserves rose from $25.8bn to $26.8bn, indicating an accretion of $1bn in two weeks.
Following the gradual increase in crude oil price and production output, the foreign exchange reserves have been rising steadily since November.
Like Chioke, other currency and economic experts are not sure if the current accretion in the external reserves’ is sustainable amid a falling naira and acute shortage of dollar in the foreign exchange markets and the economy.
The CBN had spent $4bn from the nation’s external reserves to defend the local currency last year, despite the staggering fall in the value of the naira against the United States dollar and other major foreign currencies during the period.
The controversial defence of the naira by the CBN has come under severe criticism by economists, who believe forces of demand and supply should be allowed to determine the exchange rate of the naira.
The country’s reserves had recorded $23.89bn low on October 19. The reserves dropped by 15.9 per cent between 2015 and 2016
The reserves ended last year with $25.84bn on December 30, 2016.
Shareholders of Guinness Nigeria Plc, yesterday approved the plan by the board to raise a total of N40 billion by way of rights issue to the existing shareholders.
Rights issue is an issue of shares offered at a special price by a company to its existing shareholders in proportion to their existing shares. In a rights offering, the subscription price at which each share may be purchased is generally at a discount to the current market price.
This is the first offer in the market for the year, and already there are scepticisms about the ability of the shareholders to fully subscribe to the offer, given the prevailing economic recession. This is particularly so given the very high inflation of about 18.5 percent and weakening purchasing power, thereby compounding the illiquidity in the stock market.
For Guinness, the additional fund will come in handy to pull it out from current misfortune, haven reported a pre-tax loss of -N4.4billion in 2016 largely driven by increases in net interest expense The Guinness shareholders also authorised the directors to apply any outstanding convertible loan, shareholder loan, or other loan facility due to any person from the company towards the payment for any rights or shares subscribed for by such a person under the rights issue.
Guinness Nigeria, a subsidiary of Diageo Plc, had announced at the end of 2016, its intention to offer a Rights Issue as part of plans to optimise its balance sheet and improve its financial flexibility.
Speaking at the firm’s Extra-Ordinary General Meeting (EGM) held in Lagos on Tuesday, the shareholders stressed the need for the brewing company to ensure that the capital would impact on the financial performance of the Nigeria business and help mitigate the impact of increasing finance costs in its operations.
For instance, the former President, Independent Shareholders Association of Nigeria, Sunny Nwosu, said the rights issue was long overdue, urging shareholders to participate in it to enable them grow their dividend.
The President, Nigerian Shareholder Solidarity Association, Timothy Adeshiyan stressed the need for shareholders to take their rights to increase their holdings in the company.
“If you do not take the opportunity, the holdings of our technical partners will increase but if you want it to reduce, you have to take the rights.”
The Chairman of the company, Babatunde Savage, explained that the volatility of the economy has impacted negatively on the fortunes of the manufacturing sector.
Savage disclosed that Diageo, the parent company rescued Guinness with a soft loan to procure it’s raw materials, adding that the loan as of September 2016 stood at N9.8 billion.
“Some companies are closing down while others are retrenching their staff. To procure foreign exchange is a problem. Diegio gave us loan to procure raw materials in foreign currency and that is the advantage of being a multinational firm.
“We did an analysis of our five years cash flow and we decided that there was need for us to do a capital enhancement of the business. We would continue to ensure that there is fairness. The confidence is that we will fight for everybody. The money will be enough to get the necessary capital we required.”
Investors staked N2.434 billion on 190 million shares in 2,896 deals at the stock market yesterday even as the bulls reclaimed control pushing the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) to close 0.09 per cent higher at 26, 240.45. The market had declined the previous day when investors reacted to the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) decision to retain the Monetary Policy Rate (MPR) at 14 per cent. The MPC, which met on Monday and Tuesday voted unanimously to maintain status quo by retaining the: MPR at 14 per cent; Cash Reserve Ratio at 22.5 per cent and Liquidity Ratio at 30 per cent.
Analysts had said retaining the MPR at 14 per cent would make the fixed income securities remain more attractive to investors than the equities market.
Analysts at Meristem Securities Limited, said: “Given that the MPC maintained the status quo on all policy variables, we expect the weak market mood will continue to dictate the direction of activities in the equities market. However, we advise investors to continually assess the market for opportunities to take positions in fundamentally justified stocks ahead of the full year 2016 earnings season,” analysts at Meristem Securities Limited had said.
However, the market recovered as some bargain hunters swooped on shares, making 21 equities to close higher while 16 declined. NASCON Allied Industries Plc led the price gainers with 4.9 per cent trailed by Neimeth International Pharmaceuticals Plc with 4.6 per cent. Custodian and Allied Plc appreciated by 3.3 per cent, just as Oando Plc chalked up 2.3 per cent.
Conversely, Honeywell Four Mills Plc, Livestock Feeds Plc led the price losers with 4.9 per cent apiece. A.G Leventis Plc and UACN Property Development Company Plc shed 4.6 per cent each.
Sectoral performance indicates that only the NSE Banking Index depreciated by 0.08 per cent. The NSE Oil/Gas Index appreciated by 0.49 per cent, while NSE Industrial Goods Index, NSE Insurance Index and NSE Consumer Goods Index grew by 0.41 per cent, 0.14 per cent and 0.04 per cent.
Commenting on the performance, analysts at MSL said: “We attribute the gains recorded in the market today to pockets of bargain hunting on fundamentally strong stocks. We expect the seesaw market mood to continue for the rest of the trading week.”
International ratings agency, Fitch Ratings yesterday revised the outlook on Nigeria’s long-term foreign and local currency issuer default ratings (IDRs) to negative from stable, putting it at ‘B+’.
By this, Fitch is telling international investors that the country’s debt offer is subject to speculations (uncertainty) and moving towards non-investment grade.
A credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of a country, thus there is a big impact on the country’s borrowing costs.
The last time Fitch rated Nigeria this low was shortly after unveiling of the flexible foreign exchange policy by the Central Bank of Nigeria (CBN) citing currency depreciation. According to the agency, the revision of the Outlook on Nigeria’s Long-Term IDRs reflected tight liquidity and low oil production, which have so far led to the country’s recession since 1994.
While the economy contracted through the first three quarters of 2016, Fitch now estimates a growth of -1.5 per cent in 2016 as a whole and expects a limited economic recovery in 2017, with growth of 1.5 per cent, which it said is well below the 2011-15 annual growth average of 4.8 per cent.
It added that gross general government debt increased to an estimated 17% of GDP at end-2016, from 13% at end-2015, lending a support to the rating.
Meanwhile, the CBN has said its foreign exchange utilisation records for banks showed a disbursement of $1.1 billion in November 2016.
However, of the 4,328 transactions in the period under review, five banks dominated the deals with 2,892, representing about 67 per cent of the total activity.
The banks with highest utilisation were First Bank of Nigeria, with 1,039 deals; Zenith Bank, 706; Stanbic IBTC, 397; Standard Chartered Bank of Nigeria, 389; and First City Monument Bank, 361.
Out of 25 financial institutions- commercial and merchant banks involved in the transactions, only 1,436 deals were left for the remaining 20 banks.
The apex bank yesterday asked banks to bid in a special currency auction due soon, in efforts to clear backlog of demands from businesses.
The backlogs were particularly for fuel importers, airlines, raw-materials producers, and makers of agricultural chemicals and machinery for manufacturers.
In December 2016, CBN sold about $1 billion on the forward market to tackle the backlog of dollar demands, in an effort to support production and fulfill its pledge to the real sector operators.
Research analyst at FXTM, Lukman Otunuga, noted that CBN is aware that the nation still remains exposed to both external and internal risks, particularly exchange rate, despite improved outlook, which should keep the CBN on high alert.
“It must be understood that the cause behind the incessant rise in consumer prices is the disparity between the official and black market exchange,” he said.
A Federal High Court in Lagos was informed tuesday that an Executive Director of First Bank of Nigeria Limited (FBN), Mr. Dauda Lawal, laundered funds on behalf of the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.
The counsel representing the Economic and Financial Crimes Commission (EFCC), Mr. Rotimi Oyedepo, made the revelations while responding to a counter-affidavit submitted by Lawal.
Lawal is seeking to discharge an interim forfeiture order for the sum of N9.08 billion.
Justice Muslim Hassan had on January 6, issued an interim order of forfeiture of the said sum to the federal government, following an ex parte application by the anti-graft agency seeking similar relief.
The EFCC had initiated the ex parte application seeking an interim order for the temporary forfeiture to the federal government of the sum, which it claimed was linked to Alison-Madueke.
The court had also issued 14 days to any interested party to appear and prove the legitimacy of the monies, failing which the funds would be permanently forfeited to the federal government.
At the resumed hearing of the case yesterday, Mr. Charles Adeogun announced appearance for Lawal who was joined as the respondent in the suit.
On the other hand, Oyedepo announced his appearance for the EFCC.
He informed the court that in line with its interim orders of January 6, the EFCC had served same on Lawal.
He also informed the court that the order was also published in the Independent Newspaper of January 12, in compliance with the orders of the court.
In response, the counsel to Lawal, (Adeogun) confirmed the position, but added that he had filed a counter-affidavit deposed to by Lawal, challenging the said forfeiture order.
Arguing his application, he urged the court to issue an order, directing a refund of the sum of N9.08 billion to his client on the grounds that the amount was obtained by coercion.
He argued that before such forfeiture order can be made, two essential elements must be satisfied, namely: “That the property in question is unclaimed, and that such property or funds form proceeds of an unlawful act.”
He said: “We became aware of the forfeiture order when the interim order was served on us. My client was never confronted with these sets of facts during his incarceration at the EFCC.
“After the service of the order, I requested for the statement of my client to the commission, but same was never given to me.”
He argued that his client admitted having received the sum of $25 million in clear dispensation of his duties, but was coerced by the commission to further admit to receiving a total of $65 million.
According to him, the sum of $40 million was therefore taken as an over draft from his bank to offset the alleged extra sum.
He therefore urged the court to order the immediate refund of the sum to his client.
In his response, Oyedepo submitted that the tenure of Section 17 of the Advanced Fee Fraud and Other Related Offences Act makes a property which is reasonably suspected to be proceeds of crime, forfeitable to the federal government.
He queried: “Going by the facts and circumstances of this particular case, can it be said that the sum of N9.08 billion, which is the naira equivalent of $40 million, was not reasonably suspected to form the proceeds of a crime?”
He argued that Paragraph 4 of the applicant’s reply affidavit showed a meeting of the minds of some staff of the Nigeria National Petroleum Corporation (NNPC) as well as the respondent to launder funds.
“My Lord, Paragraph 4 of our reply affidavit shows a meeting of the minds of one Gbenga Komolafe, former Group MD (sic), Crude Oil Marketing Division, NNPC; Prince Haruna Momoh, former Group MD Petroleum Product Marketing Company; Umar Farouk Ahmed, Group MD, Nigerian Product Marketing Company, as well as Lawal, to launder funds on behalf of former petroleum minister, Diezani Alison-Madueke.”
According to Oyedepo, “It will amount to contesting the obvious for Lawal to argue that he had no knowledge of the said sums.
Oyedepo argued that it was uncommon for a law enforcement agency like the EFCC to detain a person in its custody in perpetuity without an order of the court, adding that the statement of Lawal was lawfully obtained.
“The respondent was duly cautioned before he voluntarily made his statement at the commission and his lawyer even appended his signature further attesting to the fact that the statements were obtained voluntarily.
“So having freely volunteered a statement, he cannot urge my lord not to attach full probative value to his statement.
“I submit that the appropriate order in the circumstances is for the court to order a final forfeiture of the sum of N9.08 billion already surrendered by the respondent to the federal government. I urge the court to so hold,” he said.
After listening to the submissions of both counsel, Justice Hassan fixed February 16 for judgment.
Desirous of revamping the country’s ailing power sector, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) yesterday told commercial banks and other authorised dealers in the foreign exchange (FX) market to include electricity companies in its FX allocation policy, which provides that 60 per cent of total FX inflows from all sources (interbank inclusive) should be channelled to the manufacturing sector.
This is just as the MPC, at the end of its first meeting in 2017, resolved to retain its monetary policy instruments. The MPC kept the Monetary Policy Rate (MPR) unchanged at 14 per cent, the cash reserve requirement (CRR) at 22.5 per cent, held the liquidity ratio at 30 per cent, and retained the asymmetric corridor at +200 and -500 basis points around the MPR.
Briefing journalists in Abuja, at the end of the 111th meeting of the MPC, the CBN governor, Mr. Godwin Emefiele, urged operators in the power sector to take advantage of the priority FX allocation given to the real sector to enhance their operations.
“The 60 per cent that has been set aside for all FX that is available to all the banks to manufacturers, we did that for a purpose because we felt that there is a need to support the manufacturing sector.
“There is a need to ensure that FX is made available to those that will provide jobs and get manufacturing and industrial output to grow. And I am happy that the recent data released by the National Bureau of Statistics has started to show that the Purchasing Manager’s Index (PMI) is looking upwards.
“The 60 per cent that is set aside for the manufacturers, I dare say that those in the power sector also qualify for that because they are importing plants and equipment or components for their transformers and generators.
“However, I do not mean generators that people will put in their houses and generate electricity for themselves. So we will appeal to the banks to look in their direction increasingly,” Emefiele explained.
He also expressed satisfaction with level of accretion of external reserves, which according to him currently stands at $28.9 billion.
Furthermore, Emefiele said the central bank would continue to work to implement policies that would bridge the wide gap between the interbank and parallel market FX rates.
“It is exciting to see this happen. But is there a need to float the naira? It is important to note that we have to manage the reserves. That means from time to time we will intervene in the market to make sure the exchange rate does not go beyond our expectations and those interventions will be to moderate the rates as necessary.
“The fact that we have started to see some accretion in the reserves does not mean we have to be reckless. We will continue the policy of ensuring that FX is made available to those who are importing raw materials, plants and equipment, those supporting the agriculture sector and not those who want to engage in what I regard as less important sectors,” he stated.
Continuing, he added: “It is important that I must not gloss over some of the things I have heard and read in the press regarding multiple FX rates: I have heard about budget rate, I have heard about black market rate and parallel market rate, I have heard about pilgrims rate, I have heard about airlines rate and all that.
“It is unfortunate and it is unfair that some of those we have read discussing this issues are those who have direct access to the CBN. What we would have expected is that they would have talked to us. But I know that they know the objective that they are pursuing is best known to them.
“The budget rate is forecast rate. A forecast rate or budget rate has always been there from history and it is the rate that is used just to determine the budget and like you should know, a budget is a forecast. It is tentative.
“That is why I don’t understand why people would use the budget rate and say it determines the exchange rate in the market. The parallel and BDCs rates as far as I am concerned are one rate, and I don’t understand the duplicity about the rate.”
Earlier, while reading the MPC communique, Emefiele said the committee was of the view that the key undercurrents – that is scarcity of FX, low fiscal activity, high energy prices and the accumulation of salary arrears – could not be directly ameliorated by monetary policy actions.
He said the committee had also anticipated that the recent increase in oil prices would be complemented by production gains to provide the needed tailwinds to sustainable economic activity.
In that regard, the committee commended the commitment of the fiscal authorities to step up efforts to fill the aggregate demand gap through a speedy resolution of the domestic indebtedness of the federal government to states and local contractors.
The committee, he added, believed that doing so would aid the effort towards economic recovery.
“Total foreign exchange inflows through the CBN increased significantly by 82.45 per cent in December 2016, owing mainly to the increase in oil prices. Total outflows, however, spiked during the same period.
“The committee noted that the average naira exchange rate remained stable at the interbank segment of the foreign exchange market in the review period.
“The medium term outlook based on available data and forecast of key economic variables indicated a more resilient economy in 2017. Growth is expected to turn positive in fiscal 2017, as prior policy lags converge and the fiscal space becomes more accommodating.
“In addition, the agricultural sector is expected to play a bigger role in driving growth, given the expansion of the Anchor Borrower’s Programme, as well as other developmental initiatives of the government.
“Likewise, the prospects for moderation of price developments appear to be strengthening on the heels of positive developments in the food sub-sector.
“The committee re-assessed the headwinds which confronted the economy in 2016 and the opportunities for recovery in 2017. In particular, the MPC evaluated the implications of the rising wave of nationalistic ideologues across the West, the re-evaluation of trade agreements and the possibility of rapid monetary policy normalisation in the United States, with adverse consequences for other countries, including Nigeria.
“In recognition of the seemingly inevitable structural shift in the global economy, the committee reiterated the need to be more inward looking and hasten efforts towards economic diversification to support the domestic economy and improve life for the Nigerian people.
“Consequently, members acknowledged the imperative of sectoral policies and greater coordination of monetary and fiscal policy.
“The committee further noted that inflationary pressures would begin to subside as non-oil output recovers and the naira exchange rate stabilises. Until then, it stressed, a rate cut would worsen the inflationary conditions and undermine the current outlook for stability in the foreign exchange market.
“The committee also feels that doing so would further aggravate demand pressures while undermining existing income levels in the face of the already expansionary monetary policy and increasing inflationary pressure which will make the economy unattractive for foreign and domestic investments.
“Given these limitations, the committee was reluctant to lower the policy rate on this occasion but remained committed to doing so when the conditions permit.
“The MPC urged the management of the central bank to engage industry operators to discuss likely issues of asset quality, credit concentration and high foreign exchange exposures,” Emefiele added.
According to him, the MPC also urged relevant authorities to ensure the quick passage of the 2017 budget and to seriously consider using the public private partnerships in its infrastructure development programme.
Such a step, he said, would cushion the economy against any possible shocks in the event of a shortfall in budgeted revenue.
Responding to questions, he stated that importers of industrial raw materials, equipment and agricultural input would continue to be given priority in FX allocations.
The nation’s foreign reserves, he said, had risen to about $28.9 billion due to rising oil prices, noting that in spite of this, the CBN would continue to be prudent in managing the foreign reserves.
Analyst’s Reaction
Reacting to the outcome of the meeting of the MPC, the chief executive officer of Afrinvest West Africa Limited, Mr. Ike Chioke, yesterday said Nigeria’s present economic environment does not support a fully flexible exchange rate regime.
He also said it would lead to massive capital outflows, thereby leading to pressure on the FX market.
Chioke, who spoke in Lagos during the launch of the 2017 Outlook by his firm, said for a fully flexible exchange rate regime to be effective in the country, there was need for large scale reforms in sectors such as the oil and gas, power, mining, as well as significant improvement in the level of governance in the country.
“Actually, if you look at what the CBN has tried to do in the exchange rate environment, I believe they have tried given all the challenges they are faced with. If they were to go to a fully flexible exchange rate in the Nigerian economy today, I would probably be against that.
“You know why, it would be trying to solve the problem on the fringes. When you do that, all the capital would just fly out.
“To adopt a flexible exchange rate, you need to impose some massive reforms in some of the key sectors that would help to attract dollars. You can’t manage in one dimension. You have to remember that your problems are multi-dimensional.
“So, as you are trying to fix this one, remember that the other one might be opening up.
“So, a reform that focuses on large scale reforms is what the country needs before we can allow the exchange rate to float.
“Once upon a time, we were actually close to that. There was a time when between Soludo and Sanusi, we could have done that. We were getting to that sweet spot. The naira was even appreciating, but we lost that opportunity,” he said.
