The continuous fall in the value of the naira in the 2016 financial year further aggravated the woes of the Nigerian equities market and its investors, STANLEY OPARA writes
The 54.8 per cent depreciation of the naira at the interbank foreign exchange market in 2016 resulted in a N330.99bn drop in the value of the Nigerian equities market.
The equities market posted a N604bn nominal loss in 2016 as the market closed at N9.246tn capitalisation from the N9.850tn recorded a year earlier.
The Central Bank of Nigeria data showed that the interbank exchange rate of the naira to the United States dollar as of the end of last year was N305; while for 2015, it stood at N197. Therefore, a 54.8 per cent year-on-year depreciation of the naira against the greenback led to a market loss of N330.99bn in currency terms.
Thus, in real/aggregate terms, the market posted N934.99bn loss in 2016, with the fall in the value of the naira playing a major role.
The gap between the interbank and parallel market rates of the naira against the dollar also widened significantly during the year, following the immense pressure on the currency, as the parallel market rate exchanged reached a high of N490/dollar at year-end.
In an attempt to bridge the gap between the rates and ease the pressure on the naira, the apex bank introduced the flexible exchange rate system, as well as an over-the-counter foreign exchange futures market on June 15, 2016.
In order to manage the pressure on the naira, the apex bank continued to manage the liquidity level through Open Market Operations and other interventions, hence, the system’s liquidity stood relatively low throughout the year, when compared to the prior year.
The President, Funds Managers Association of Nigeria, Dr. Ore Sofekun, said the country’s equities market had suffered a serious downturn over the last 36 months, driven by the combined effects of political risk (from the uncertain outcome of the 2015 elections), drop in oil prices, and the inadequate policy response to reduced dollar liquidity.
She said the prevailing market circumstances had not spared even large and blue chip companies, as all players in the market were taking a beating in their share prices at the moment.
According to her, companies seeking to raise fresh or additional capital in the Nigerian capital market are finding it increasingly difficult to attract the attention of stock market investors at the moment.
“If a company lists during a downturn like this, investors may price the shares much lower than the value the company’s management expects,” Sofekun added.
Analysing the economy in 2016, the Nigerian Stock Exchange recently said the bottoming out of crude oil prices and a drastic decline in domestic oil output affected crude oil export, which accounts for roughly 90 per cent and 70 per cent of the country’s forex earnings and government revenue, respectively.
This, it noted, resulted in foreign exchange liquidity challenges during the year, as the supply side of the forex to the CBN dropped by over 70 per cent despite heavy domestic demand.
Accordingly, the oil price shocks and the attendant prolonged forex dilemma, coupled with challenges to policy implementation, drove the Nigerian economy into its first recession in over 20 years by the second quarter of the year, the Exchange noted.
To this end, the Chief Executive Officer, NSE, Oscar Onyema, said capital markets tend to act as barometers of any economy; and in Nigeria’s case, the prolonged economic downturn directly impacted an array of products and asset classes on the Exchange.
After peaking at 31,071.25 in June 2016, an increase of 8.48 per cent over the 2015 closing value, the NSE All-Share Index began to retreat to negative territory as total foreign inflow dropped by 45 per cent between June (N42.46bn) and July (N23.43bn).
Onyema said the development was a function of the loss of confidence in the implementation of an announced free floating forex regime; weak corporate performance; and second consecutive quarter of negative economic growth in the period, resulting in the economy entering into a recession.
He explained, “Accordingly, we witnessed the lowest levels of foreign portfolio and domestic trading activities post the global financial crisis, with a year-on-year decline of 69.79 per cent and 56.79 per cent, respectively.
“This trend is consistent with the inverse correlation observed between the value traded on the NSE’s equity market and the spread between the parallel and interbank forex market rates, suggesting that both domestic and foreign investors seek stability in the monetary policy.
“In addition to sluggish performance in secondary markets, primary market activity was non-existent as there were no Initial Public Offers for the year, although there was one new company listed by introduction in the period.”
Amid these challenges, the Exchange said it had resolved to do a better job at promoting its unique value proposition to both global and domestic investors.
According to the bourse, good coordination between fiscal and monetary policies should result in the resolution of the identified structural deficiencies and drive economic growth, going forward.
It stressed, “We expect investors to continue to keep a close watch on the divergence between the interbank forex rate and other exchange rates in the country.
“Accordingly, a convergence of forex rates in the country and the performance of listed corporates will determine the level of market activity in the short term.”
The Director, Institutional Sales, Vetiva Capital Management Limited, Pabina Yinkere, said the current bearish state of the equities market aggravated by naira volatility would only make companies get weaker valuations than they would prefer for quoted firms and those warming up for listing.
The President, Constance Shareholders Association of Nigeria, Shehu Mikail, maintained that the country’s stock market was seriously troubled as the internal inflation was vehemently being strengthened by the forex crisis.
He said the outcome of the last year could repeat itself in 2017 if the government did not intensify its efforts to better the situation, as the stock market would continue to be a reflection of the country’s economic standpoint.
Treasury bills valued at a total of N196billion are expected to mature this week. However, the impact of the maturing bills on liquidity level in the market is expected to be tapered by a rollover of the same amount in a treasury bills auction this Wednesday. In addition, the Central Bank of Nigeria (CBN) is expected to mop-up liquidity by way of open market operations (OMO) auctions at the start of this week, in line with its tightening policy, due to relatively high liquidity, analysts at Afrinvest West Africa Limited have revealed.
To this end, they anticipated that money market rates would rise this week. Meanwhile, last week opened with improved aggregate financial system liquidity (N134.9 billion from N88.9 billion the preceding Friday). Consequently, money market rates – open buy back (OBB) and overnight rates declined 41 basis points (bps) and 25bps respectively to close at 7.9 per cent and 8.6 per cent last Monday. However, the CBN mopped up N223.4 billion last Monday and the impact of the debit for successful bids at the auction weighed on system liquidity on Tuesday despite FAAC inflows which hit the system; as a result, OBB and overnight rates rose 7.1 per cent and 7.2 per cent points respectively to close at 15 per cent and 15.8 per cent. Eventually, OBB and overnight rates closed the week at 8.8 per cent and 9.7 per cent, indicating a 49bps and 85bps increase week-on-week respectively. But performance in the treasury bills market was mixed but largely bullish as average rate (across tenors) closed lower on 3 of 5 trading sessions during the week.
Forex Market Activities at the interbank foreign exchange market remained minimal during the week as liquidity crunch lingered. Also, the CBN’s weekly intervention continued from Monday to Friday as interbank spot rate remained tightly held at N305.00/$ throughout the week. At the parallel market, the naira depreciated on all trading days, from N490/$on Monday, to N497/$ on Friday. This was despite indications by the Association of Bureau De Change operators to adopt N400.00/US$1.00 as BDC rate during the week. Also, in the Futures market, the value of open contracts rose to $3.8 billion from $3.7 billion the preceding week. “We observed that the value of the “soon to mature” NGUS JAN 25 2017 rose by $58.3 million during the week. Nonetheless, despite attractive prices of the contracts on offer, most of the contracts in the Futures market remained largely undersubscribed due to overhanging liquidity crisis in the currency market. “We expect exchange rate at the interbank to remain stable in the week ahead as the CBN continues daily intervention. Meanwhile, plans by the CBN to resume dollar sales to BDC operators may offset some of the pressure on exchange rates at the parallel market,” Afrinvest stated in a report.
Bond Market Review Sentiment in the local bonds market was broadly bearish last week with yields rising on most trading sessions as investors sold off particularly on the medium to long dated instruments. Average yield across benchmark bonds declined 36bps on Monday before inching higher for the rest of the week save for Thursday when average yields dipped 8bps. Consequently, average yield closed the week at 16.3 per cent, up 0.2 per cent week-on-week. This week, the Debt Management Office (DMO) is scheduled to conduct its first Primary Market Auction in 2017. The DMO will be re-issuing N40 billion of the JUL 2012, N50 billion of the JAN 2026 and N40 billion of the MAR 2036 instruments. In the Eurobonds market, performance across Africa sovereigns was largely bearish as yields rose across instruments save for the South African sovereigns, Ghana 2023 and Ghana 2026 instruments. Average yields on the Nigerian sovereign Eurobonds rose 11bps week-on-week. It was however a largely bullish week for Nigerian Corporate Eurobonds as yield declined on all the instruments but Fidelity 2018 (up 52bps week-on-week) and Access 2021 (up 11bps week-on-week) whilst Zenith 2019 closed the week flat. The FBN 2021 had the best outing thus far in 2017, with year-to-date price change of +3.9 per cent.
December 2016 Inflation The Consumer Price Index (CPI) rose year-on-year to 18.55 per cent in December 2016, from the 18.48 per cent recorded in November, the National Bureau of Statistics (NBS) revealed on Friday.). Increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yield the Headline Index. Communication and Restaurants and Hotels recorded the slowest pace of growth in December, growing at 5.33 percent and 8.91 percent (year-on-year) respectively. The Food Index rose by 17.39 percent (year-on-year) in December 2016, up by 0.20 percent points from rate recorded in November (17.19) percent. During the month, all major food sub- indexes increased, with Soft Drinks recording the slowest pace of increase at 7.66 percent (year on year). Price movements recorded by All Items less farm produce or Core sub- index rose by 18.10 percent (year-on- year) in December, down by 0.10 percent points from rate recorded in November (18.20) percent. During the month, the highest increases were seen in Housing, Water, Electricity, Gas and Other Fuels, Clothing and Footwear and Education, growing at 27.27, 21.62 and 17.84 respectively.
Bureau De Change Operators The Association of Bureaux De Change Operators of Nigeria (ABCON) last week urged the Central Bank of Nigeria (CBN) and the federal government to harmonise the multiple exchange rates in the country. Also in its bid to create awareness, promote consistency and support the CBN towards achieving exchange rate stability, the association launched an official BDC exchange rate portal. The website was unveiled at a media parley in Lagos . The association also maintained that it’s official exchange rate is $399/$. Acting president of ABCON, Alhaji Aminu Gwadabe said: “We urge the regulators and the government to harmonise the multiple exchange rates that pervaded the 2016 fiscal year. We also use this medium to appeal to members of the print and electronic media to adopt a single foreign exchange market rate system in their reporting and completely disregard the rates in the parallel market as it is small in volume, cash base and not recognized by enabling law.” He further said the association would continue to collaborate with CBN to improve the forex crisis.
Diaspora Bonds The federal government last week disclosed that it will look to issue a debut diaspora bond by March to raise funds from Nigerians abroad, after completing a $1 billion eurobond sale this month. Nigeria is in its first recession in 25 years and needs to find money to make up for shortfalls in its budget. Low prices for crude and militant attacks in its crude-producing heartland, the Niger Delta, have slashed its oil revenues. It first announced plans to sell diaspora bonds in 2013 to raise between $100 million to $300 million, but the government at the time could not finish appointing bookrunners for the sale before an election that swept the opposition into office. The government plans to borrow up to $10 billion, with about half of that coming from foreign sources as it seeks to boost overseas loans to plug funding gaps and lower costs. But so far only the African Development Bank has publicly confirmed a budget support package of $1 billion. The government has held talks for months with the World Bank, China and other institutions to fund the budget gaps. In December, the government appointed Citigroup, Standard Chartered Bank and Stanbic IBTC Bank to manage the $1 billion eurobond sale, which it hopes to begin marketing in January.
World Bank The World Bank last week predicted that the Nigerian economy would rebound from recession and grow by one per cent in 2017. The multilateral institution stated this in its January 2017 Global Economic Prospects report. Nigeria’s third quarter 2016 real gross domestic product (GDP) had contracted by 2.26 per cent from -2.06 per cent in the second quarter of this year, and -0.36 per cent in the first quarter. But the World Bank predicted that: “Growth in South Africa is expected to edge up to a 1.1 percent pace this year. Nigeria is forecast to rebound from recession and grow at a 1 percent pace. Angola is projected to expand at a 1.2 percent pace.” According to the Bank, sub-Saharan African growth was expected to pick up modestly to 2.9 per cent in 2017 as the region continues to adjust to lower commodity prices. Growth in South Africa and oil exporters was however expected to be weaker, while growth in economies that are not natural-resource intensive should remain robust. Global economic growth was forecast to accelerate moderately to 2.7 percent in 2017 after a post-crisis low last year as obstacles to activity recede among emerging market and developing economy commodity exporters, while domestic demand remains solid among emerging and developing commodity importers, the World Bank said in the report.
The World Bank has predicted that Nigeria will get out of recession and grow its Gross Domestic Product by one per cent this year after plunging into its worst recession in over two decades.
The bank said in a statement on Wednesday, “Sub-Saharan African growth is expected to pick up modestly to 2.9 per cent in 2017 as the region continues to adjust to lower commodity prices.
“Growth in South Africa and oil exporters is expected to be weaker, while growth in economies that are not natural-resource intensive should remain robust.
“Growth in South Africa is expected to edge up to a 1.1 per cent pace this year. Nigeria is forecast to rebound from recession and grow at a 1 per cent pace. Angola is projected to expand at a 1.2 per cent pace.”
The World Bank’s January 2017 Global Economic Prospects report also projected that growth in the advanced economies would edge up to 1.8 per cent in the current year.
It stated that fiscal stimulus in major economies, particularly in the United States, could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects.
Growth in emerging market and developing economies as a whole should pick up to 4.2 per cent this year from 3.4 per cent in the year just ended amid modestly rising commodity prices, the bank stated.
Emerging market and developing economy commodity exporters are expected to expand by 2.3 per cent in 2017 after an almost negligible 0.3 per cent pace in 2016 as commodity prices gradually recover and as Russia and Brazil resume growing after recessions.
It, however, added that the outlook was clouded by uncertainty about policy direction in major economies.
Commenting on the report, the President, World Bank Group, Jim Yong Kim, stated, “After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon.
“Now is the time to take advantage of this momentum and increase investments in infrastructure and people. This is vital to accelerating the sustainable and inclusive economic growth required to end extreme poverty.”
The report noted the worrisome recent weakening of investment growth in the emerging markets and developing economies, which account for one-third of the global GDP and about three quarter of the world’s population and the poor.
The World Bank’s Chief Economist, Paul Romer, said “We can help governments offer the private sector more opportunities to invest with confidence that the new capital it produces can plug into the infrastructure of global connectivity.
“Without new streets, the private sector has no incentive to invest in the physical capital of new buildings. Without new work space connected to new living space, the billions of people who want to join the modern economy will lose the chance to invest in the human capital that comes from learning on the job.”
The Central Bank of Nigeria (CBN), has approved of the sum of N1 billion soft loan for the Imo State Government for disbursement to the operators of Micro Small and Medium Scale businesses in the state, out of N2 billion applied for in 2014.
Also, the state is expecting the N9 billion approved of by the CBN last year for the states’ Anchor Borrower’s rice project scheduled to commence in full scale first quarter of this year.
”We have not received the funds” he said.
The Chief Economic Adviser, Planning, Budget and Economic Development, to the Governor, Iyke Njoku, made the disclosures on Tuesday while briefing some journalists in his office in Owerri, on the issue and 2017 budget proposal, noting that the CBN approved of the N1 billion in December 2016, out of a total of N200 billion the bank had put in the fore for the states in the country to access. According to him, a template known as ‘Special Purpose Vehicle’ (SPV), would be adopted by the government for the disbursement of the loans to the qualified persons who are ready to repay one year with a single digit of 2 per cent as specified by the CBN.
He said: ”It is not meant for big businesses. It is not political. It is purely business. It may not have some form of collataral.”
Njoku, said the soft loan would be channelled to the Agro and trading sectors of the economy which the state government expects to have yields in several thousands at the end of the day.
In accessing the funds, Njoku said a monitoring team of officials from the Debt Management Office (DMO), were involved On the budget proposal of N131,143.44,297 presented by the governor, Rochas Okorocha, to the House of Assembly, December 23, last year, Njoku, said the Economic Sector, Social and General administration took large chunk, while Works and Housing also collected much.
Agriculture, N6. 4 billion; Education N4.5 billion; Lands and Survey, N3.9 billion and Public Sector, N3.2 billion. He used the opportunity to state that the state was not owing any commercial bank in the country.
Investors and international donors, he said, have placed interests to the projects in driving the economic growth of the country, Njoku opined.
The federal government will issue a debut diaspora bond by March to raise funds from Nigerians abroad, after completing a $1 billion eurobond sale this month, a finance ministry source told Reuters yesterday.
Nigeria is in its first recession in 25 years and needs to find money to make up for shortfalls in its budget. Low prices for crude and militant attacks in its crude-producing heartland, the Niger Delta, have slashed its oil revenues.
It first announced plans to sell diaspora bonds in 2013 to raise between $100 million to $300 million, but the government at the time could not finish appointing bookrunners for the sale before an election that swept the opposition into office.
The government plans to borrow up to $10 billion, with about half of that coming from foreign sources as it seeks to boost overseas loans to plug funding gaps and lower costs.
But so far only the African Development Bank has publicly confirmed a budget support package of $1 billion. The government has held talks for months with the World Bank, China and other institutions to fund the budget gaps.
In December, the government appointed Citigroup, Standard Chartered Bank and Stanbic IBTC Bank to manage the $1 billion eurobond sale, which it hopes to begin marketing in January.
Remittances are the second-largest source of foreign exchange receipts in Nigeria, after oil revenues. Citizens living abroad send at least $10 billion home annually. Nigeria is the world’s fifth-biggest destination for international remittances after China, India, the Philippines and Mexico, with five million Nigerians living abroad sending money back to relatives, according to Western Union.
Meanwhile, the Africa Finance Corporation (AFC), a pan-African multilateral institution based in Nigeria, is likely to make a debut U.S. dollar sukuk issue by early February, banking sources close to the deal told Reuters yesterday. If AFC makes a final decision to go ahead with the proposed debt sale over coming days, the sukuk will be issued in two or three weeks through a private sale, a banking source familiar with the transaction said.
At least one of the banks arranging the transaction is based in the United Arab Emirates, the source added. A spokeswoman at AFC declined to comment. A private placement normally requires less documentation than a bond listed on a public exchange.
The sukuk would be structured with a murabaha format, a popular cost-plus structure in Islamic finance, and use Nasdaq Dubai’s platform for murabaha transactions, according to a report by Moody’s Investors Service, which assigned a provisional A3 credit rating to the Cayman-domiciled special purpose vehicle. “We will see more sukuk issuance from Africa-based issuers over the next few years” as borrowers seek to expand their investor bases, global head of Islamic finance at S&P Global Ratings, Dr. Mohamed Damak said.
“Another reason for issuers in Africa to choose the sukuk route is that sometimes sukuk can be cheaper than (conventional) bonds in terms of cost of funding, especially when it attracts significant interest from the market.” AFC obtained a 15-year, $50 million line of financing from the Saudi Arabia-based Islamic Development Bank in 2015. It issued a debut $750 million conventional bond in 2015, a five-year deal that offered a 4.375 percent coupon. Last year it issued a 100 million Swiss franc bond. That paper, with a maturity of three years and 150 days, pays a 0.85 percent coupon and was arranged by Deutsche Bank and UBS.
The Central Bank of Nigeria (CBN) has exposed a group which called itself Wailing Wailer as paid hirelings, describing them as a bunch of blackmailers fighting for the interest of those who want to destroy the Nigerian economy. The group which goes by the tag OccupyCBN had threatened to protest efforts of the CBN to conserve scarce foreign exchange. In a statement, the CBN Ag. Director of Corporate Communications, Mr. Isaac Okorafor described them as paid agent of some selfish interest groups and enemies of the Nigerian economy. He said further that “the allegations are totally false and fabricated”. According to him, there is no iota of truth to these allegations. Mr. Okorafor said that the CBN did not allocate or sell any $12 million to anybody. He challenged the group to show proof, stating that such a thing is not possible under the new forex system.
He stated that “these paid agents of selfish interests and the enemies of the Nigerian economy will fail in their bid to distract the CBN and the Federal Government from their focus on the diversification of the Nigerian economy away from import and crude oil dependency”. The CBN spokesman pointed out that “some powerful interests want the CBN and Government to reverse the policy on conservation of forex and sabotage the ongoing efforts to wean Nigerians from senseless importation”. He opined that they want to create markets for importers to the overall detriment of the Nigerian economy. He went further to state that no amount of blackmail will make the CBN allow a practice whereby our farmers and industrialists who have invested heavily and employed our youths in the production of Nigerian made rice, fish, industrial starch, palm produce, wheat, tooth pick, wines, etc, would be made to close their farms and factories again. He noted that what these charlatans and hirelings want are basically twofold; first, they want the CBN to give out the nation’s scarce foreign exchange to their sponsors to import all manner of foreign goods and dump them on our markets, thereby frustrating the good work our own farmers and manufacturers have begun. Second, they want the CBN to fold its arms and allow currency speculators to drive the naira down to a level at which it will be easy for their paymasters to buy up and take control of the Nigerian economy. They have even gone to the extent of making false allegations that some banks are having trouble just to trigger panic in the financial system.
These will not happen, he stated emphatically. According to Mr. Okorafor, “it will be economically suicidal for the CBN to allocate our scarce forex to those who will engage in another escapade in senseless importation, which will again discourage our local producers who have borrowed money to engage in agriculture and local manufacturing”. He noted that it will be dangerous to our peasants in the rural areas and indeed to masses of Nigerian workers who are on fixed incomes for the CBN to allow speculators to drive the value of the naira to any level just for the selfish gains of the sponsors of these arrangee protests. “We will not succumb to blackmail”, he said. On the issue of the CBN funding the Federal Government budget, Mr. Okorafor said that this has been long addressed, with clear figures which have been widely publicized. He reinstated that the role of the CBN as banker to the Federal Government is to do exactly what had been done and it is within the limits specified by law. He queried if the so-called group would want the CBN to withhold advances so that the government collapses?
The Nigerian equities market opened 2017 on a bearish note, shedding N214 billion in the first week. Having recorded positive performance in the last weeks of December, most investors resorted to profit taking in the New Year, a development that depressed the broader index. Specifically, the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) went down by 2.3 per cent to close at 26,251.39. Similarly, market capitalisation shed N214 billion to close lower at N9.032 trillion.
Although trading was for only four days, three out of the days were negative. The only positive performance was recorded on Friday (+0.2) as gains in the banking space – Zenith Bank (+1.8 per cent), Access Bank (+2.3 per cent), United Bank for Africa Plc (+1.5 per cent ), Ecobank Transnational Incorporated (+1.2 per cent) FBN Holdings (+1.7 per cent) and Guaranty Trust Bank Plc (+0.3 per cent) – bolstered. Apart from the NSE ASI that closed negatively, all other indices also finished lower during the week. The NSE Industrial Goods Index led with a decline of 3.0 per cent following weak sentiments toward Dangote Cement (-4.0 per cent) and Lafarge Africa Plc (-2.3 per cent). The NSE Consumer Goods Index went down by 2.3 per cent on account of losses suffered by Dangote Flour Mills Plc (-4.9 per cent), Nigerian Breweries (-4.0 per cent) and Guinness Nigeria (-3.7 per cent). The NSE Banking Index shed 1.6 per cent as a result of profit taking in GTBank (-4.7 per cent) and ETI(-4.2 per cent). Also the NSE Oil & Gas Indices lost 1.6 per cent on the back of losses by Mobil Oil (-5.0 per cent) and Forte Oil (-4.6 per cent). The NSE Insurance Index recorded a 0.2 per cent as NEM Insurance Plc and Custodian shed 9.5 per cent and 4.9 per cent respectively. Daily Market performance
The market opened the first trading day of the year bearishly. The market followed the same trend on the second day, leading to a decline of 1.41 per cent in the first two trading days of 2017 as some investors lock in profits while others await government’s economic policy direction for year. The NSE ASI went down by 0.46 per cent on Tuesday to close at 26,495.04. Similarly, market capitalisation shed N41.9 billion to close at N9.1 trillion as a total of 17 stocks declined while 14 stocks appreciated. Commenting on the performance, analysts at Meristem Securities Limited said: “The performance can be ascribed to profit taking activities on some counters that rallied towards the close of the prior year. For the rest of the week, we expect a continuation of today’s trend, hence, we posit that the market may close the week on a negative note.” For the third consecutive day, the Nigerian equities market continued on its downward trend on Thursday with NSE ASI declining by 1.07 per cent. NAHCO, emerged the highest loser for the day, shedding 9.49 per cent to close at N2.86. Guinness (-5.00 per cent), Dangote Cement (-4.94 per cent), Custodian (-4.88 per cent), and Caverton (-4.44 per cent) also featured on the top laggards’ list for the day. Market performance, as measured by NSE-sector indices, showed that the NSE Banking Index and NSE Insurance Index appreciated by 1.67 per cent and 0.71 per cent respectively. Conversely, the NSE Industrial Goods, and the NSE Oil & Gas shed by 1.81 per cent, and 0.14 per cent in that order. According to analysts at Meristem Securities Limited, Wednesday’s was affected by a decline in the share price of Dangote Cement which lost 4.01 per cent.
“Ex-Dangote Cement, the market would have returned 0.35 per cent. While we expect the market to close negative for the week, we envisage that the market may gain tomorrow(Friday) on the backdrop of bargain hunting activities on stocks that have suffered price declines recently and are trading at historically low levels,” they said. The total value of stocks traded on Thursday was N898.71 million, up by 2.88 per cent from N873.57 million recorded the previous day, while the total volume of stocks traded was 137.69 million shares n in 2,488 deals. The most actively traded sectors were: Financial Services (110.66 million), Conglomerates (11.13 million), and Industrial Goods (5.38 million shares), while the three most actively traded stocks were: Fidelity Bank (25.05 million shares), Diamond Bank (16.95 million shares) and United Capital (11.03 million shares). However, the market rebounded on Friday, as the NSE ASI appreciated by 0.15 per cent to close at 26,251.39. The appreciation recorded in the share prices of Guinness, GTBank, Zenith Bank, Access Bank and FBN Holdings were mainly responsible for the rebound. Investors traded 210.20 million shares worth N1.51 billion in 2,659 deals. The three most actively traded stocks were: Oando (51.13 million shares), FCMB (35.87 million shares) and Zenith Bank (20.81 million shares), while the most actively traded sectors were: Financial Services (131.98 million), Oil and Gas (52.34 million shares), and ICT (10.77 million shares). Market turnover
Meanwhile, a total of 4.319 billion shares worth N7.376 billion in 9,330 deals were traded this last week by investors in contrast to a total of 405.939 million shares valued at N3.724 billion that exchanged hands the previous week in 6,363 deals. As usual the Financial Services sector led the activity chart with 4.177 billion shares valued at N5.306 billion traded in 5,047 deals, thus contributing 96.71 per cent and 71.94 per cent to the total equity turnover volume and value respectively. The Oil and Gas sector followed with 65.827 million shares worth N594.522 million in 1,385 deals. The third place was occupied by Conglomerates sector with a turnover of 26.487 million shares worth N48.163 million in 299 deals. Trading in the top three equities namely – Unity Kapital Assurance Plc, Omoluabi Savings and Loans Plc and FCMB Group Plc accounted for 3.863 billion shares worth N3.013 billion in 286 deals, contributing 89.45 per cent and 40.85 per cent to the total equity turnover volume and value respectively.
Also traded during the week were a total of 55 units of Exchange Traded Products (ETPs) valued at N505.65 executed in 11 deals, compared with a total of 9,965 units valued at N56,446.35 transacted the previous week in 16 deals. A total of 5,100 units of Federal Government Bonds valued at N5.120 million were traded this week in two deals, as against no bond transaction the preceding week. Price gainers and losers The price movement chart showed that 18 equities appreciated, lower than 37 equities of the previous week. Thirty-one equities depreciated in price, higher than 21 equities of the previous week, while 126 equities remained unchanged higher than 117 equities recorded in the preceding week. UACN Property Development Company Plc led the price gainers with 14.5 per cent, trailed by United Capital Plc with 10.6 per cent. Access Bank Plc appreciated by 6.9 per cent, just as Eterna Plc, FCMB Group Plc and Unity Bank Plc garnered 6.4 per cent, 6.4 per cent and 6.3 per cent in that order.
Other top price gainers included: FBN Holdings Plc(4.4 per cent); UBA(4.0 per cent); Fidson Healthcare Plc(3.9 per cent);and CAP Plc (3.1 per cent). Conversely, NAHCO led the price losers with 13.9 per cent, trailed by Cement Company of Northern Nigeria Plc with a decline of 13.4 per cent. N.E.M Insurance Plc and Sterling Bank Plc shed 9.5 per cent and 7.8 per cent respectively. Other top price losers included: Cadbury Nigeria Plc (7.6 per cent); Union Bank (5.1 per cent); Mobil Oil Nigeria (5.0 per cent); Dangote Flour Mills (4.9 per cent); Ashaka Cement Plc(4.9 per cent) and Custodian and Allied Plc (4.8 per cent).
Investors in UACN Property Development Company (UPDC) Plc, United Capital Plc, Access Bank Plc, Eterna Plc and FCMB Group Plc have started counting their gains at the stock market. Although the market recorded a decline of the 2.3 per cent in the first trading week of 2017, these five stocks witnessed significant appreciation in their prices.
UPDC led with 14.5 per cent rise, followed by United Capital with 10.6 per cent. Access Bank Plc went up by 6.9 per cent, while Eternal Plc and FCMB Group added 6.4 per cent and 6.3 per cent respectively. For the shareholders of the United Capital, it has been a very bullish period despite the overall negative performance by the market in the past one year. United Capital had delivered an impressive return of 108.4 per cent to investors in 2016 before added another 10.6 per cent last week. Market operators attributed the consistent high demand for shares of United Capital, which led to the capital appreciation, to the impressive financial results of company.
United Capital Plc had last year recorded an impressive performance and rewarded shareholders with a dividend of 35 kobo per share. The company is already heading for another impressive year in 2016 going by its nine months ended September 30. According to results, gross earnings stood at N5.689 billion in 2016, up from N4.088 billion in the corresponding period of 2015. Investment income grew soared from N491 million to N2.612 billion, while net operating income settled at N5.132 billion compared with N3.722 billion in 2015. Profit before tax grew by 65 per cent to N3.962 billion in 2016 from N2.397 billion, while profit after tax rose from N1.910 billion to N3.170 billion. It followed that with a highly impressive performance for the half year to June 30, 2016, growing PBT by 47 per cent. The Group Chief Executive Officer of United Capital Plc, Mrs. Oluwatoyin Sanni expressed optimism that the company would consistently deliver value to all stakeholders.
“I have no doubt in my mind that the strategies we have put in place in light of our expectations of market scenarios in the coming year will prove effective in delivering much better results. I must thank all of you for your constant support in our task of building a leading financial services firm in Africa. I am confident that with the dedication of our resourceful staff and your unalloyed support, we will continue to delight you with superior return in every line of business we are involved,” Sanni said.
The Board of Directors of Vitafoam Nigeria Plc has recommended a dividend of N125 million for the shareholders for the year ended September 30, 2016. The dividend translates to 12 kobo per share.
The recommendation of the dividend was contained in a notification to the Nigerian Stock Exchange (NSE), made available yesterday. Although full details of the audited results for the period were not made available, the dividend is in line with the recent assurance by the company, which said that despite the economic recession, shareholders would receive dividend.
The Group Managing Director and Chief Executive Officer of Vitafoam, Mr. Taiwo Adeniyi last week explained that 2016 was a very tough period, saying the most difficult problem was how to make realistic business decision in the face of continuous uncertainty in view of insecurity, exchange rate, interest rate, devaluation of the Naira and insecurity of lives and property.
He, however, expressed optimism that his company’s board and management had learnt how to operate profitably under recession assured the shareholders of dividend.
“Our shareholders are our pride. We have an obligation to work very hard to ensure that they are rewarded. We have consistently paid dividend. We shall pay dividend for 2016 despite the recession. We have always sustained our culture of shareholder value and we shall continue to appreciate our shareholders’ advice on how to move the company forward.
It has been difficult to plan under recession. But we have mastered the terrain. We can now do better planning. Our strategic focus is now to plan by the day. We plan as they come. At least we can now forecast some variables. This is helping us,” Adeniyi said.
Speaking on the manufacturing sector, Vitafoam boss noted that companies that import most of their raw materials had challenges with the exchange and availability of Dollars due to improper alignment of fiscal and monetary policies.
According to him, the federal government’s policy of preferential allocation of Dollars to genuine manufacturers did not achieve desired result because it is cashed backed. He explained that the manufactures could not take advantage of the special window for forex because many of them could not back their high demand with cash while the banks who are supposed to lend money had liquidity problem.
The Central Bank of Nigeria (CBN) sold N172.85 billion at its first treasury bill sale of the year on Wednesday with yields unchanged from the previous auction, held on December 21, fixed income traders said on Thursday.
Reuters quoted traders to have revealed that the central bank sold N115.85 billion of one-year debt at a rate of 18.68 percent, the same as the previous auction, traders said. They said the central bank also sold N35 billion of 91-day paper at 14 percent and N22 billion of six-month bills at 17.5 percent, unchanged from the previous auction. Subscription at the auction came to N194.12 billion , well up from N42.68 billion at the previous auction.
The central bank issues treasury bills regularly to help lenders manage their liquidity, curb rising inflation and provide naira to help the government fund its budget. The monetary policy committee had last November left the benchmark monetary policy rate at 14 per cent. Inflation also stood at 18.48 per cent in December.
CBN Governor, Mr. Godwin Emefiele had pointed out that although interest rates are a veritable tool for curtailing inflation, with inflation at 18 per cent; “the CBN would be abjectly failing on one of its cardinal objectives if it cuts interest rates at this time.”
According to him, although he remains a strong believer in low interest rates, discussions around low interest should be based on facts, rather than politics or emotions.
“For those who say we need a rate cut to spur growth, we need to remind that high inflation is highly inimical to economic growth. Indeed, many empirical studies have estimated the threshold level at which inflation becomes significantly growth retarding to be 11 percent for developing countries.
“With ours at 18.3 per cent, one must question the judgment of cutting interest rates at this time. Finally, I think it is important to underscore that interest rates reflects not just the cost of capital but also the cost of doing business, and so we need to also look at interest rates from the perspective of the lender.
“Given that most banks have decided to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high interest rates. Notwithstanding these facts, we will continue to use moral suasion to encourage commercial banks to be more considerate in interest charges on customers,” the CBN governor had said.
