Archives March 2017

Keystone Bank gets transitional board

Following the sale of Keystone Bank Limited to the Sigma Golf-Riverbank Consortium by the Asset Management Corporation of Nigeria, the new owners have announced the names of members of the lender’s transitional Board of Directors.

In a statement on Tuesday, the lender listed the members as Alhaji Umaru H. Modibbo (Chairman); Mr. Hafiz Bakare (Acting Managing Director/CEO); Mrs. Yvonne Isichei (Executive Director); Mrs. Titilayo Adebiyi (Non-Executive Director); and Mr. Bulus Bunken Dan-Habu (Non-Executive Director).

According to the bank, the transitional governance arrangement, which will take effect from April 1, 2017, is subject to approval by the Central Bank of Nigeria.

The statement read, “By the 31st of March 2017, the current Board of the Bank (including the MD/CEO, Mr. Philip Ikeazor) would have fully disengaged, except for Bakare and Isichei, who will continue as part of the transitional governance board.”

Source:© Copyright Thisday Online

UBA, Stanbic IBTC’s Impairment Charges Hit N47.5bn

United Bank for Africa Plc and Stanbic IBTC Holdings Plc have set aside N47.48 billion to cover bad loans in their 2016 financial results. The provision showed a jump of 138 per cent compared to N19.9 billion they set aside in 2015.

Access Bank Plc, Guaranty Trust Bank (GTBank) Plc and Zenith Bank Plc, had reported a total loss provisions N119.59 billion, indicating an increase of 183 per cent from N42.297 billion in 2015.

However, when UBA and Stanbic IBTC released their audited results last week, they followed the same trend of rising impairment charges as a result of the economic headwinds that had affected some of their debtors.

A breakdown of the impairment charges showed that UBA made the higher provision of N27.68 billion, which is a significant jump from N5.06 billion in 2015. That of Stanbic IBTC rose from N14.9 billion to N19.8 billion.

Despite the huge impairment charges, both financial institutions ended the year with higher profit after tax (PAT). For instance, Stanbic IBTC Holdings grew its PAT by 51 per cent to N28.52 billion, from N18.891 billion in 2015.

UBA’s PAT rose by 22 per cent from N60 billion to N72 billion in 2016. Based on the performance, the Board of Directors of UBA proposed a final dividend of 55 kobo,, bringing the total dividend to 75 kobo per share for the year. The bank had earlier paid an interim dividend of 20 kobo.

Commenting on the results, the Group Managing Director and Chief Executive Officer of UBA, Kennedy Uzoka expressed satisfaction at the resilience of the bank, despite the macroeconomic challenges in a number of countries where it operates.

He said: “Given the operating environment in 2016, I am very pleased with our profitability – an impressive 32 per cent growth in profit before tax to N91 billion – whilst we have also focused keenly on operational efficiencies, illustrated by the reduction in our Cost-to-Income Ratio.”

Speaking on the bank’s outlook for the 2017 financial year, Uzoka said: “As we implement our Customer First Philosophy, we are approaching 2017 with real optimism, especially with the outlook remaining positive in many of our markets, where we benefit from our increasingly diverse revenue streams. We reiterate our pledge to delivering excellent service to our customers, and remain committed to creating superior and sustainable return for our shareholders.”

Speaking in the same vein, Chief Financial Officer (CFO) of UBA Group, Ugo Nwaghodoh said, 2016 performance reflected the strong potential and resilience of the bank’s business.
“We grew top and bottom lines by 22 per cent and 32 per cent respectively, despite the stagflation in Nigeria, our core market. Reflecting improved balance sheet management and better value extraction, our net interest margin (NIM) improved to 6.7 per cent,” he said.

Source:© Copyright Thisday Online

Nigeria, Norway rally investors on non-oil export promotion

•Government targets $18 billion by 2019
To boost bilateral ties and increase inflows of foreign direct investments, stakeholders within Nigeria and Norway have sought opportunities in the non-oil sector in addressing economic challenges bedevilling the two nations.

Besides, the Nigerian Export Promotion Council (NEPC) has identified a potential earning of $18 billion from non-oil export sector by 2019 if opportunities in the sector are properly harnessed.

According to stakeholders, the challenges impacting both on the Nigerian and Norwegian national economies have created unprecedented opportunities to strengthen commerce and investment ties between our countries.

Speaking at the Nigerian Norwegian Chamber of Commerce’s quarterly business roundtable in Lagos, the Chairman of the Chamber, Chijioke Igwe stated that though the global economy is undergoing both structural and cyclical adjustments, due in part to the collapse of energy prices, there are significant areas of complement across the economic landscapes of both Norway and Nigeria.
He said: “Both our countries have had a long and productive trade relationship over many years; both economies are also committed to economic diversification from the traditional engine of growth, the energy sector

“While Norway has a highly developed industrial and services base, Nigeria presents viable investment potential, with the wealth of human capital, agriculture, mineral resources, infrastructure and value added manufacturing”.

The Chief Executive Officer of NEPC, Olusegun Awolowo stated that the Federal Government’s agenda to replace oil as the major national foreign exchange earner will see the country’s earnings growing to $30 billion by 2025 if there is an increase in production output from farms, while exporters explore ways to penetrate new markets.

Awolowo stated that the outputs from the farms are very low to meet local demand, even as pressure rises to increase foreign exchange earnings from non-oil export.

“The world’s largest exporters tend to be wealthier than other nations even as only three countries in the top 20 exporters depend mainly on oil exports. It is time for Nigeria to plan for a future with zero oil. As such we are focusing on sectors based on financial value, degree of complexity and products where the nation has comparative advantage”, he added.

Citing the need to deepen trade ties between Nigeria and EU countries, the Head of Trade and Economics section, EU Common Embassy in Nigeria, Filippo Amato stated that the body is interested in the development of the country and would not jeopardise its growth.

Igwe added that the NNCC was established in order to create a platform to facilitate trade and investment, remove perception barriers and mitigate transaction risks that its members might experience in exploiting the commercial potential in Nigeria.

Source:© Copyright Guardian Online

Investors in equities lose N2.3trn to bonds, others

The rise in the issuance of bonds and other debts instruments by governments and corporate organisations has taken a heavy toll on the fortunes of the equities sector. Market investors may have lost about N2.3trillion in recent years.

The preference for the bonds and debts instrument arises from the fact that returns on such facilities, which are loaned to governments or corporate bodies, are guaranteed for the fixed period of their tenure, unlike the stocks or equities which are exposed to the vagaries of market forces as they are traded daily.

For instance, the market capitalisation of quoted equities, which was put at N11, 237 trillion on January 5, 2015, stood at N8,842 trillion as at Tuesday, March 21, 2017, down by N2.3 trillion, while the All-share index declined by 8384.72 points or 32.8 per cent, from 33,943.29 to 25,558.57.

Overall, the practice has made government the biggest competitor of the equities market as its unrestricted floating of official bonds and debts instruments has rechannelled elsewhere funds needed to stimulate activities in the stock market.
Consequently, investors may choose to remain in the market and become poor, or divest in pursuit of the new investment fad called government bonds. Either way, the equities market is weakened as funds required to boost trading are being gradually crowded out by incessant bonds issuance by government.

Crowding out occurs when increased government involvement in a sector of the market economy substantially affects the other sectors of the market, either on the supply or demand side. Domestic debts are debts instruments issued by the Federal Government and denominated in local currency.

Indeed, the worry stems from the priority that the debts enjoy over equity during payment on account of the risk management strategies and the poor investment decisions demonstrated by some investors in relation to the current slow economic activities.

Furthermore, investors pointed out that with the high level of debts instruments, the lull in the equities market may hit a deeper bottom and become more intense, as more investments would be channelled to the fixed income market.

In the last three years, a number of bonds and debts instruments have been issued to support various ventures, the latest being two weeks ago when the Debt Management Office (DMO) listed its $1billion Sovereign Eurobond on the FMDQ OTC Securities Exchange Plc.

The 15-year Eurobond priced at par and at a coupon of 7.875 per cent per annum is the first foreign currency denominated security to be listed and traded in the Nigerian debt capital market.

Last month, Forte Oil Plc listed N9 billion bonds on the platform. The bond, which is the first under the company’s N50 billion bond issuance programme with 17.50 per cent fixed rate, was listed concurrently on the NSE. The bond with a five-year tenure represents the first corporate listing on the FMDQ this year.

The FMDQ OTC PLC (FMDQ), on April 8, 2015, had welcomed the listing of the United Bank for Africa Plc’s N30.50billion first series’ seven-year 16.45% Fixed Rate Subordinated Unsecured Notes due in 2021 (the UBA Bond). Also, in October 2015, the securities exchange achieved another feat with the listing of N8 billion Nigeria Mortgage Refinance Company (NMRC) bond on its platform.

The Chief Executive Officer of NMRC, Prof. Charles Inyangete, explained that the successful completion of the bond issuance and the investors’ interest it generated underscored the confidence reposed in the underlying principle and operational model of the NMRC.

These listings have, therefore, opened an opportunity for other Nigerian corporate organisations to raise funds from the international market to list bonds for trading by local investors on the platform.

The long reign of the bears and the continuous depreciation in stock prices in the equities also became a justification for their apathy to investing in the stock market.
The Director General of the DMO, Federal Government’s debt management body, Dr. Abraham Nwankwo, had assured that it would put modalities in place to ensure that government debt instruments do not take away much-needed funds required to boost the equities market. He spoke during the facts-behind-the listing presentation of the $1billion Euro bond. This has not happened even as stakeholders insist that instead of this constant bleeding, government measures must stimulate investments from outside into the capital market, especially the equities sector.

Reacting to the development, the President and Chairman of Governing Council of the Institute of Capital Market Registrars (ICMR), Bayo Olugbemi, affirmed that bonds and government instruments were already crowding out funds from the equities market.

He noted that because of the attractive coupon rate (interest rate) and frequencies of payment on these instruments, they hold more promises for every segment of investors.
“Therefore, putting one’s scarce funds in the not very attractive equities market will be akin to willingly throwing your resources into the pit. The major reason for investing is to get attractive returns,” he added.

The Managing Director, GTI Plc, Amos Aladere, said that the challenge was not just in crowding out funds from the equities market, but also stifling private business owners in the country.

He explained that lenders’ funds were migrating to the Federal Government savings bond, leaving little or nothing for equities market and indigenous entrepreneurs. “SMEs are the growth catalyst of any economy. But it will later be beneficial to the economy if the funds being raised are used to speed up infrastructural development.”

The National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Adeniyi Adebisi, said that the ideal option under the circumstances was that government measures should stimulate investments from the outside into the equities market.

“The National Assembly’s committees on Capital Market, the Nigerian Stock Exchange, the Securities and Exchange Commission (SEC), shareholders activist groups at a seminar in Badagry recently expressed worries about the dwindling fortunes of the capital market from N13trillion some years ago to now below N9 trillion.

“In a way, Federal Government’s floating of savings bonds into the capital market is a positive step towards deepening the market, as was hitherto widely clamoured. However, the gain of one sector of the capital market is the loss of another sector. The savings bonds issues have certain advantages over the stock capital market, and as such will necessitate movements of funds from that sector to the other sector of the same capital market,” he said.

Source:© Copyright Guardian Online

Naira may gain further, hits 385/dollar

The naira is likely to strengthen further on the black market as the Central Bank of Nigeria steps its interventions in the foreign exchange market.

According to currency analysts and economic experts, the naira will record further gain in the coming days as the CBN aims to narrow the gap between the official and parallel market rates.

The naira strengthened to 385 to the dollar on the black market on Thursday, from 395 on Wednesday, and from 457 last Thursday.

On the official interbank market, the naira closed at 308 to the dollar, against 306 last Thursday.

“We see the exchange rate converging at some point between 380-400 naira to the dollar in the near term because of the determination of the central bank to increase dollar supply,” the President, Association of Bureau De Change operators, Aminu Gwadabe, said.

A currency expert at Ecobank Nigeria, Mr. Kunle Ezun, said the dollar might sell at 375/380 next week if the central bank continued its intervention programme in the forex market.

“It depends on what the CBN is targeting; but the good thing is that when the dollar sells for between 375 and 380, the incentive to do round-tripping will not be there anymore and this is good for the market, the economy and the country,” he added.

The CBN was planning to sell $100m in currency forwards on Thursday to be delivered within the next 60 days.

The local currency has been appreciating in recent weeks on the back of the continued and consistent interventions in the forex market by the CBN.’

Meanwhile, the Kenyan shilling is expected to remain stable over the next week, mainly owing to importers’ demand for dollars outweighing inflows from farm exports.

Market participants said there was no consensus on what policymakers are likely to do when they meet to set interest rates on March 27, according to a Reuters report.

The Tanzanian shilling is seen trading in a tight range against the dollar, helped by a slowdown in demand for the US currency.

“The shilling will likely remain range-bound next week due to subdued business activity. Demand and supply of dollars are largely matching each other at the moment,” a trader at a commercial bank told Reuters.

The Ugandan shilling is seen weakening moderately in the days ahead, weighed down by a typical surge in appetite for hard currency from manufacturers towards month-end.

Ghana’s cedi would be expected to remain bullish next week, bolstered by strong forex liquidity inflows amid weakening dollar demand, analysts said.

After touching record lows of 4.742 to the dollar this month, the cedi has rallied steadily to reach 4.40 by mid-morning on Thursday, compared to 4.56 a week ago. It is down about four per cent since January, Reuters data shows.

“We expect a sustained bullish cedi in the face of comparatively weaker demand for the greenback amidst sufficient forex supply,” analyst at Accra-based Dortis Research, Joseph Biggles Amponsah, said.

“However, to extend this gain into the next quarter, the supply of dollars to the market needs to be sustained.”

The kwacha is expected to hold firm against the dollar next week because of hard currency conversions by companies preparing to pay salaries and other month-end obligations.

Source:© Copyright Punch Online

Market Performance Remains Negative on Profit Taking

The performance of the stock market remained negative thursday as profit taking persisted. However, the decline was marginal as sentiments were mixed. Although price gainers outnumbered price losers, losses suffered by bellwether stocks made the Nigerian Stock Exchange (NSE) All-Share Index (ASI) to remain in the negative territory. The NSE ASI shed 0.05 per cent to close lower at 25,514.03.

Seplat Petroleum Development Company Plc led the price losers with 9.7 per cent trailed by Guinness Nigeria Plc, which went down by 4.2 per cent. African Prudential Registrars Plc and Access Bank Plc declined by 3.7 per cent and 3.5 per cent per cent in that order. NASCON Allied Industries Plc closed 2.9 per cent lower just as Diamond Bank Plc shed 2.1 per cent.

Forte Oil Plc and FCMB Group Plc dipped by 1.7 per cent and 1.6 per cent respectively, while Zenith Bank Plc went down by 1.4 per cent.

Zenith Bank is losing value a day after the shareholders approved its final dividend of N55.573 billion final dividend for the year ended December 31, 2016.

On the positive side, Lafarge Africa Plc maintained the number spot on the gainers’ chart, rising by 8.4 per cent to close at N41.00 per share. The stock had similarly led the price gainers the previous day as investors reacted to the 105 kobo dividend the cement manufacturing firm recommended for 2016 year.

Although the dividend is lower than the 300 kobo paid the previous year, market operators said they least expected any dividend from Lafarge Africa Plc given its nine months results that showed N40 billion loss.

Lafarge Africa Plc reported a profit after tax of N16.8 billion as a result of tax credit of N39.71 billion. The profit was 38 per cent lower than the N27 billion profit recorded in 2015.

But for the tax credit, which came mainly from deferred tax assets generated from Unicem operations, the company would have ended 2016 with a loss before tax of N22.8 billion.

The Chief Executive Officer, Lafarge Africa, Mr. Michel Puchercos, had said the immediate objective of the company is to deliver fully on “our turnaround plan by optimising our processes, developing our alternative fuel strategy, reducing operational costs to deliver strong EBITDA margins returning to historic levels.”

Apart from Lafarge, Learn Africa Plc also appreciated yesterday, chalking up 4.6 per cent. Livestock Feeds Plc garnered 4.6 per cent, while Sterling Bank Plc and Fidson Healthcare Plc appreciated by 4.2 per cent and 4.1 per cent respectively.

Source:© Copyright Thisday Online

Zenith Bank Shelves Plan to Raise N100bn

Zenith Bank Plc has shelved plan to raise N100 billion via a combination of bonds and share sales due to weak capital markets, it said on Thursday.

The bank had expected market conditions to improve when it announced plans to seek approval for the funds last month, said Zenith’s head of investor relations Michael Anyimah, but the lender cancelled them due to the struggling economy.

“The request for shareholders’ approval to raise fresh capital has been withdrawn,” Reuters quoted Anyimah to have said, adding that the bank had strong buffers to support its operation.

Zenith Bank shares which had shed 6.4 per cent this year on the Nigerian Stock Exchange closed at N13.60 per share thursday.

Nigerian regulators have been trying to revive their IPO market which dried up almost 10 years ago following a crisis in the West African country. The Securities and Exchange Commission has proposed to cut listing fees to attract issuers. Zenith posted a pre-tax profit of N156.75 billion for 2016, up from N125.62 billion a year earlier.

Source:© Copyright Thisday Online

Dollar Drops Below N400/$ for First Time in Seven Months

For the first time in seven months, the dollar fell below the psychological N400 barrier, when the greenback traded at N399 to the dollar in Lagos and exchanged at N395 in Abuja, lower than N410 at which it traded on Tuesday.

With the gains made by the local currency in the last five weeks, the naira inched closer to one of the Central Bank of Nigeria’s (CBN) key foreign exchange policy objectives of an exchange rate convergence.

The naira trades for N375 to the greenback for invisibles and at N307 to the dollar on the FX interbank market, the official window for manufacturers and importers of raw materials eligible to buy FX from this segment of the market.
The last time the naira traded at between N395 and N400 to the dollar on the parallel market was in August 2016.

The significant gains made by the naira on the parallel market, according to market analysts, was a reflection of the improved confidence in the FX market, following the sustained dollar interventions by the CBN since last month.
One analyst also attributed the gains made by naira to the Bureau de Change (BDC) operators that are awash with dollars and with little or no customers to patronise them.

He said several retail customers who used to resort to the BDCs (which realistically fund the parallel market) to fund invisible transactions now get to buy dollars at a lower rate from the banks.

“The BDCs are awash with cash. Remember that the central bank sold about $200,000 to each BDC at some point and they had also bought dollars at high rates which they hoarded, thinking that the naira would remain in a free fall.

“But with the CBN’s intervention, they are stuck with loads of dollars and little or no customers, so they have stopped buying dollars and are looking for avenues to offload what they bought at ridiculously high rates.

“Essentially, the speculative attacks on the naira has come back to haunt them and they’ve got their fingers burnt,” he said.

In all, the central bank has auctioned a total of $1.895 billion through forward sales, as well as targeted intervention for invisibles.

This amount does not include its daily intervention of $1.5 million on the interbank market.
The CBN Governor, Mr. Godwin Emefiele, on Tuesday expressed optimism about the convergence of the FX rates on the official and parallel markets, stating that the gains made by the naira against the greenback in the last five weeks was not a fluke.

Emefiele said he was happy that the central bank’s intervention was yielding positive results.
“I am happy, indeed very gratified, that the interventions have been positive, we have seen the rates now converging and we are strongly optimistic that the rates will converge further.

“In terms of sustainability, I think it’s important for us to say that the foreign reserves at this time are still trending upwards to almost $31 billion as I speak with you.

“And the fact that we have done this consistently for close to five weeks, should tell everybody or those who doubt the strength of the central bank to sustain this policy,” he had said after the meeting of the Monetary Policy Committee (MPC).

But an analyst at Ecobank Nigeria, Mr. Kunle Ezun, who welcomed the development in the FX market, pointed out that achieving a convergence between the official (interbank rate) and parallel market rate would be a more onerous task.
“For us to have a convergence between the interbank and parallel market, it would require the CBN to devalue the official exchange rate to about N350 to the dollar.

“Without that, I don’t see how the official and parallel market rates can converge. Maybe what the CBN governor was talking about is achieving a convergence between the parallel market rate and the rate for invisibles, which is N375 to the dollar.

“But what the CBN has done in the last one month has really helped the parallel market rate. But we need to see improved liquidity on the interbank market,” Ezun said in a phone chat with THISDAY.

Sarah Alade Bows Out

In another development, the Deputy Governor of the CBN, Economic Policy, Dr. Sarah Alade, retired on Wednesday and urged Emefiele to uphold the credibility of the bank.

Alade, who for four months served as the acting governor of the central bank, following the suspension of the former CBN governor, Sanusi Lamido Sanusi, now the Emir of Kano, also recalled a dark period during her stint when the central bank had “four governors”.

Alade spoke at a send off held at the CBN headquarters in Abuja that had in attendance Emefiele; the Minister of Finance, Mrs. Kemi Adeosun; Minister of Budget and National Planning, Senator Udoma Udo Udoma; and officials from the International Monetary Fund (IMF) and World Bank, reported the News Agency of Nigeria (NAN).

Sanusi, in February 2014, was suspended by former President Goodluck Jonathan over allegations of financial recklessness and misconduct.

This happened after Sanusi had claimed that the Nigerian National Petroleum Corporation (NNPC) had not remitted $20 billion from crude oil earnings to the treasury.

“Throughout my period at the bank, I had one slight regret and that’s during the period I was the acting governor. It was the time that the CBN was being investigated. It had never happened before that the activities of the CBN were under investigation.

“We went for the IMF meetings and when we met with investors, they asked us ‘what is happening? We understand that there was some financial mismanagement in the CBN’. It was humiliating.

“I think for me, that was a low point. The credibility of this institution was eroded.
“For an institution this important to be subjected to that, is bad. At the end of the day, it was not just CBN that suffered for it but the economy as a whole did suffer.

“So I want to encourage us that whatever we need to do, let us do it right. We must not subject this institution to that type of incident again,” she said.

Sharing her experience as acting governor, Alade explained that the investigation had paralysed activities at the bank.

“I remember that during that period, I was reminded every morning that we had four governors.
“The suspended governor, the governor-in-waiting, the acting governor and the investigating governor.

“I remember that the investigating governor told us that there should be no initiative, no payment, no decision-making, nothing. The only thing we could do was to just maintain the bank.
“So the bank was sort of paralysed. We could not do anything. For me, it was a humiliating experience, but we did the best we could,” she said.

The persons Alade was referring to were Sanusi – suspended governor; Emefiele – governor-in-waiting; Alade – acting governor; and Mr. Jim Obazee – investigating governor, who at the time was the Executive Secretary of the Financial Reporting Council of Nigeria (FRCN).

Obazee, who was recently fired by President Muhammadu Buhari, had written a damning report on the bank’s 2011 and 2012 audited financial accounts under Sanusi’s stewardship.

At the send off for Alade, Emefiele described her as “a friend, colleague and a woman of extreme virtue”.
He applauded her for her hard work and the 23 years she had served at the central bank.

Similarly, Adeosun described the retiree as one of the brilliant and inspiring Nigerian women in the financial sector.

In her capacity as the Deputy Governor, Economic Policy, a post she held for 10 years, Alade served on the teams on major economic policy studies and was involved in the preparation of the CBN’s Monetary and Credit Policy proposals over the years.

She was actively involved in the drafting of the Medium Term Economic Programme for Nigeria and the IMF Staff Monitored Programme/Standby Arrangement.

She was also a member of the Technical Committee on Vision 2010 and is currently a member of the Technical Committee on Vision 2020, as well as the National Economic Management Team.

As deputy governor, Alade superintended over the Economic Policy Directorate, comprising the Research, Monetary Policy, Trade and Exchange, Statistics Departments and the Financial Markets Department.

As chair of the Monetary Policy Implementation Committee, she interfaced with operational departments and coordinated technical inputs for the Monetary Policy Committee of the CBN.

Fitch: Banks Continue to Face Headwinds

Meanwhile, Fitch Ratings on Wednesday said Nigerian banks would continue to face challenges this year, following the extreme difficultly they faced in 2016.

The ratings agency, in a report on Nigerian banks, pointed out that the financial institutions faced multiple threats from the operating environment in 2016, including Nigeria sliding into recession, the economy continuing to suffer from low oil prices, and severe shortages of foreign currency (FC).

Consequently, banks struggled with declining operating profitability (excluding translation gains), sluggish credit growth, fast asset quality deterioration, tight FC liquidity and weakening capitalisation, putting increasing pressure on their credit profiles.

Fitch stated that the “outlook for the rest of 2017 is not much brighter. We believe that the banks will continue to face extremely tight FC liquidity despite the authorities’ best efforts to normalise the foreign exchange (FX) interbank market and improve the supply of US dollars”.

It added: “Importantly, deliveries under the CBN’s FX forward transactions since first half of 2016 have helped the banks access US dollars and reduce a large backlog of overdue trade finance obligations to international correspondent banks.

“However, given the severity of the FC liquidity issues, refinancing risk remains at the top of our perceived risks for the sector, especially as some banks have large Eurobond maturities in 2017/2018.

“Fast asset quality deterioration is in line with our expectations given the macro challenges and the continuing issues in the oil-sector.

“Oil-related impaired loans (NPLs) are high and this excludes large volumes of restructured loans. Other industry sectors contributing to NPLs include general commerce and trading, which have been affected by both the naira depreciation and FC shortages.

“For the Fitch-rated banks, we believe the NPL ratio could rise to 10%-12% by end of first half 2017 (this remains lower than the CBN’s reported figure for the entire sector).

“As a one-off policy change, the CBN allowed banks to write off all fully reserved NPLs by end-2016. Together with significant loan restructuring (particularly in the oil sector), this will ease pressure on NPLs for now, in our view.

“Slower economic growth and a lower risk appetite from banks will continue to translate into subdued credit growth and weak core earnings generation in 2017.

“Loan growth averaged 25% in 9M16, but this was due to the currency translation effect post-devaluation as about half of sector loans are in FC.”

According to Fitch, loan growth was negligible in constant currency terms, adding that banks’ 2016 profitability was underpinned by large translation gains booked on net long FC positions following the naira devaluation.

“Excluding these, some banks would have reported a significant fall in operating income. Regulatory capital ratios are high from a global perspective, but remain under pressure due to inflated risk-weighted assets (due to the FC translation effect) and lower core retained earnings.

“In our view, there is a limited margin of safety as some banks could very easily breach minimum regulatory requirements in the event of further naira depreciation and/or weaker asset quality,” it added.

The agency observed that the Long-Term IDRs of all Nigerian banks are in the ‘B’ range, indicating highly speculative fundamental credit quality.

The low ratings, it noted, reflect the significant influence of the weak operating environment, which overshadows other rating factors.

“The banks’ IDRs are driven by their Viability Ratings, Fitch’s assessment of their standalone creditworthiness.
“Following a re-assessment of potential sovereign support available to the banks in 2016, Fitch believes that sovereign support cannot be relied on given Nigeria’s (B+/Negative) weak ability to do so in FC.

“As a consequence, we removed sovereign support from the Long-Term IDRs. Overall, the largest Nigerian banks with stronger and more diverse business models, high revenue-generating capacity and stronger liquidity profiles appear to be coping better than smaller banks on most metrics.

“However, tail risks remain high for all banks due to their sensitivity to concentration risk,” it said.

Source:© Copyright Thisday Online

Lafarge Africa’s Full Year Profit Falls by 38% to N16.8bn

Lafarge Africa Plc, one of the leading cement and building solutions providers in Nigeria, yesterday reported a profit after tax (PAT) of N16.898 billion for the year ended December 31, 2016, showing a decline of 38 per cent compared with N27.163 billion in 2015.

According to the audited results, Lafarge Africa Plc recorded revenue of N219.714 billion, compared with 267.234 billion in 2015. Loss before tax stood at N22.818 billion, compared with a profit before tax of N29.286 billion. However, a N39.717 billion tax credit, which came mainly from deferred tax assets generated from Unicem operations, lifted the company’s PAT to N16.898 billion.

The board has recommended a dividend of 105 kobo, which is 65 per cent lower than 300 kobo the company declared in 2015.

Commenting on the performance, the Chief Executive Officer, Lafarge Africa, Michel Puchercos, said: “Our turnaround plan delivered solid results in fourth quarter (Q4) 2016 in spite of the challenging environment in Nigeria and South Africa. Technical challenges have been resolved with all our plants operating at high reliability. Our energy optimisation plan has proved successful with increased use of alternative fuel (AF) to offset gas shortages. Ewekoro 1 plant migrated from 100 per cent reliance on gas and LPFO to about 40 per cent use of AF at the plant. Logistics and commercial turnaround plans are in place and enabling to restore market share.”

According to Puchercos, Mfamosing line 2 was delivered ahead of time and above specification, and is now fully operational.

“The new Line contributed 338kt in Q4 2016 to cement production volume and is expected to deliver significant cost savings going forward. Our immediate objective is to deliver fully on our turnaround plan by optimizing our processes, developing our alternative fuel strategy, reducing operational costs to deliver strong EBITDA margins returning to historic levels,” he said.

The company explained that in Q4, the third-party syndicated loan of $88.4 million was pre-paid, through a loan refinancing arrangement with LafargeHolcim Group. This inter-company loan was hedged through a non-deliverable futures (NDF) transaction. “Consequently, overall $581 million debt was restructured, which removed the FX impact on Lafarge Africa’s results. Net debt was reduced to N108.3 billion, below the N120 billion announced notably supported by capex control and solid cash flows,” the company said.

Source:© Copyright Thisday Online

SEC Moves to Deepen Capital Market via New Cost Structure

The Securities and Exchange Commission (SEC) is intensifying efforts to deepen the nation’s capital market by ensuring that more companies raise funds and get listed in the market.

The new issue market has been relatively dormant with initial public offering (IPO) drying up in recent times. Although the market has witnessed the listing of two companies this year, the prospect of more companies coming to list is not very bright. However, in a move expected to attract more activities in the market, SEC has proposed a reduction in the cost of primary equity and fixed income issues.

However, the commission is seeking the contributions of stakeholders in the market before making the new fees operational. In the proposed cost structure, the total primary fixed income issuance fees will be 2.293 per cent, down from the current 3.9375 per cent. Similarly, primary equities issuance fees will be 2.833 per cent as against 3.17 per cent.

SEC will charge issuers 0.275 per cent for any N500 million to be raised, as against 0.30 per cent currently charge. The next N500 million will attract 0.225 per cent fees, while balance above N1 billion will attract 0.15 per cent commission. Also, NSE will charge listing fee of 0.25 per cent on the Main Board subject to maximum fee of N200 million. Listing fee for the Premium Board will be 0.25 per cent of offer size subject to maximum fee of N400 million, while listing on ASeM attract flat fees of N100,000. For fixed income primary issuance fees, the SEC is expected to charge 0.15 per cent on the first N500 million being raised by an issuer compared to 0.15 per cent of offer size previously charged. The next N500 million will as well attract 0.145 per cent fee, while balance above N1 billion will attract 0.1425 per cent fee. For the NSE, there is zero fee for companies already having equity listing, compared to 0.15 per cent of offer size originally paid by issuers.

Issuing houses are expected to charge 1.35 per cent for every initial N1 billion being raised by companies from the equities market, just as issuing houses are expected to charge 1.35 per cent of offer size. The next N1 billion will attract 1.225 per cent fee, while balance over N2 billion will cost the issuer 1.15 per cent of the offer size.

Furthermore, the Central Securities and Clearing System (CSCS)’ commission on N5million is fixed at 0.0075 per cent of the offer size as against 0.01 per cent currently charged.
But companies without equity listing are expected to pay 0.0375 per cent issuance fee. While that of CSCS is capped at N5 million at 0.0075 per cent of the offer size, stockbrokers are expected to collect 0.13 per cent of offer size as fee.

However, the commission proposed 900 per cent increase in registration filing fees for all categories of Capital Market Operators( CMOs), from N5,000 to N50,000, while processing fee is pegged at N200,000.
According to the proposed rule, registration for stock/commodities exchanges, bankers to an issuer, clearing and settlement agency/depository agency will go up by 900 per cent from N100,000 to N1 million respectively, registration for an over-the-counter market is being raised to N1 million, while that of inter broker/dealer and capital trade points have been pegged at N500,000 respectively, among others.
SEC has given stakeholders up to March 28, to send in their contributions to the proposed fees structure before it will become operational.

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