The Nigerian Stock Exchange (NSE) has approved the application of Portland Paints and Products Nigeria (PPPN)Plc to raise additional capital from existing shareholders via a right issue.
The company had last September applied to the NSE that it would issue 600 million ordinary shares of 50 kobo each at N3.30 per share on the basis of three new shares for every two shares already held to shareholders.
However, the NSE has approved the application at an issuing price of N1.70 instead of the N3.30 initially proposed by the company. With the new price, PPPN will be raising about N1.020 billion from the right issue.
The Chairman of PPPN, Mr. Larry Ettah last year gave indication of the right issue when he told the shareholders at the company’s s annual general meeting that it would raise additional capital in pursuit of its plan to improve returns and address the high leverage position of the company and other business expansion plans.
“We will apply the planned rights proceeds to minimise the debt exposure risks of our business as well as carry out targeted expansion in our operations. The business will focus on its growth brands as well as make the necessary investment in marketing to improve its brands’ awareness and visibility,” Ettah said.
According to him, the company commenced a process of restructuring the business focusing on internal efficiencies and reviewing our route to market model in a bid to ensure that we build a sustainable future for the business.”
He had assured that despite the challenges and risks posed by the business environment, the company, whose flagship brand is Sandtex, would continue to consolidate on the restructuring and seek growth opportunities to deliver returns to the shareholders.
He disclosed that the company would focus on innovation and seek opportunities to introduce new products into its array of brands as it pursues increased profitability.
PPPN recorded 159 percent growth profit after tax in 2014 to N148 million, from N57.3 million in 2013. However, the company did not pay dividend because it was conserving funds to finance its expansion and business re-engineering process. Meanwhile, the equity market declined further yesterday with the NSE All-Share Index declining by 0.17 per cent to close at 26,201.60.
The Governor of Central Bank of Nigeria, Mr Godwin Emefiele, yesterday offered insights into the prevailing economic crisis in the country, explaining that it was caused by the nation’s failure to diversify the base of its economy.
The CBN chief, who spoke in Abuja at the Annual Media Trust Dialogue, with the theme, “Beyond Recession: Towards a Resilient Economy,” also defended the monetary policies of the apex bank, saying they were made in the best interest of majority of Nigerians.
Panelists at the dialogue had come down heavily on the central bank’s monetary policies, arguing that they weighed heavily in favour of the few rich in the country. They were particularly critical of its forex policy which allocates 60 percent of the nation’s forex to the manufacturing sector that they said accounts for only 10 per cent of the Gross Domestic Product (GDP).
At the parley were other prominent Nigerians, including the Speaker of House of Representatives, Hon. Yakubu Dogara; Minister of Finance, Mrs. Kemi Adeosun; a former minister of Petroleum Resources, Chief Philip Asiodu; and the Chairman, Standard/IBTC, Mr. Atedo Peterside, who all proffered solutions to the nation’s biting economic hardship.
But Emefiele said the panelists’ perception of the CBN policies was wrong, submitting that the “policies were put in place to help Nigeria pull through the hard time.” He said the forex policy was meant to stimulate the economy at a time of acute scarcity.
He explained that the country found itself in the present situation due to lack of appropriate commitment to economic diversification, especially when the earnings from oil were as high as $140 per barrel, just as he noted that earnings of the government had risen to as high as $3.2 billion and fell to about $500m per month recently. According to the governor, there was also a time when the crude oil price stabilised at $105 per barrel over a period of five years.
“What did we do with the huge accretion to the reserves then?” he queried yesterday. Emefiele therefore, counselled critics of the CBN and government policies that “priority will be given to Nigerian masses by managing the limited resources to provide for industrial raw materials, plants and equipment and agricultural inputs in order to create employment and generate wealth.”
One of the panelists, Mr. Atedo Peterside, had raised concern that the foreign exchange policy of the CBN was hurting business interests to which the CBN Governor responded that policy makers don’t make policies in isolation or are designed to hurt the citizenry but with the objectives to improve the life of all concerned and not just for a few powerful and rich individuals.
Many of the speakers at the dialogue, however, suggested radical and bi-partisan measures to build a vibrant economy.
They recommended that for the nation to overcome the recession and begin a trajectory of sound economic growth, it must, among others, go back to the era of rolling plans, embark on massive infrastructure development, and align fiscal and monetary policies efficiently.
In his opening remarks, Asiodu who was the chairman of the occasion, embarked on a historical journey, tracing the nation’s present economic stagnation to the abandonment of development planning.
He recalled that in the early ’70s, the Yakubu Gowon administration had a comprehensive development plan, which was jettisoned when former President Olusegun Obasanjo emerged as military head of state in 1976.
He recalled that successive administrations also abandoned development plans until the late Gen. Sani Abacha enunciated a broad economic plan, encapsulated under Vision 2010.
According to him, by 1998, all the institutions to galvanise efforts towards implementing the 2010 blueprint were already put in place by the Abacha administration.
That blueprint, he regretted, was also jettisoned by the civilian administration under former President Obasanjo in 1999.
Asiodu noted that the President Goodluck Jonathan government was to come up with Vision 2020 and the Transformation Agenda, which were not implemented to the letter.
He lamented that the lack of political will and commitment to pursue and implement development plans by past administrations set the stage for the deterioration of infrastructure, and brought the nation to the current economic quagmire.
Asiodu observed that in the first republic, Nigeria was at par with the Asian Tigers growth-wise because there were workable development plans. He said it was wrong to look at the economic recession from the standpoint of oil and the precipitous fall in the price of the commodity.
Asiodu, who was also a former Chief Economic Adviser to former President Obasanjo, said the fall in the price of oil was not the cause of the nation’s problem, arguing that many African countries without oil were doing well.
He called for a national income policy, and underscored the desirability of such a policy with a flash back to when he was in government.
In her presentation, the Finance Minister, Mrs. Kemi Adeosun, noted that lack of infrastructure had held the country down for too long, regretting that an abysmally low investment on infrastructure had been a trend over the years.
Adeosun lamented that the previous administrations missed the opportunity of investing massively on infrastructure, which she described as the bedrock of economic growth and development, when oil prices were very high.
She also debunked views that Nigeria is an oil economy, describing the notion as erroneous. According to her, with a daily oil production of 2.2 million barrels of oil per day (mbpd) for a population of about 180 million people, compared to Saudi Arabia’s 10 mbpd for a 30 million population, Nigeria cannot be described as an oil economy.
The minister stated that poor investment on infrastructure, corruption and inability to foresee the future when oil prices were high led to the current economic recession.
She noted that the present administration was desirous of navigating the country out of past mistakes and launch it into a sustainable economic growth, anchored on massive infrastructure. Investment in infrastructure, she noted, was the key to the nation’s industrialisation.
In his presentation, the Chairman of Stanbic IBTC Bank, Mr. Atedo Peterside observed that while the present administration was doing some things right, it was equally taking many wrong steps, noting that there was a reluctance on the part of the government to break away from the past.
According to him, the Buhari administration has just this year to make an impact on the economic landscape and the general well-being of the nation as politicking would dominate the scene from 2018.
He listed some of the challenges of the administration as the inability to take bold, holistic and audacious approach to harmonise fiscal and monetary policies to attain sound economic outcomes.
Peterside said the government’s monetary and economic policies were at best unclear, citing the existence of multiple forex regimes and half-hearted policy on deregulation, among others.
On what he listed as 11 items he considered as the grey areas that government did not do well, he said not resolving the Niger Delta agitation expeditiously was a major undoing, which had dire economic consequences for the country.
That, he said, led to a $6 billion monthly revenue loss, even as he picked hole in the lack of will for the full deregulation of the downstream sector. He also pooh-poohed the CBN forex policy, particularly its directive to the banks to allocate 60 per cent of their FX resources to the manufacturing sector.
Peterside said it was wrong to allocate 60 per cent FX to a sector that accounts for about 10 per cent of GDP and leave a mere 40 per cent to all the other sectors, adding that it engendered a huge distortionary trend, created panic in the system and led to the disappearance of forex inflows.
He also stated that shying away from the political restructuring of the nation was a serious mistake on the part of the government adding that irrespective of how unpalatable the concept might sound to some people, it was a necessity.
While calling for an open mind on the issue, Peterside, who punctuated every point with “because I love my country,” noted that less than 25 per cent of the nation’s 36 states were economically viable.
In his keynote address, the Speaker of the House of Representatives, Hon. Yakubu Dogara, said he was optimistic the economy would come out of the recession soon, adding that the National Assembly was collaborating with the executive to turn the economy around.
He regretted that lack of development plans was the nation’s bane, adding that wasting resources to plan and not implementing such plans was wrong.
Dogara noted that while the federal government was tackling terrorism, it was disturbing that other security challenges, including armed robbery, kidnapping and other vices were on the prowl. He regretted that attracting Foreign Direct Investment (FDI) would be difficult in such an atmosphere.
For the nation’s capital market to make some reasonable level of recovery in 2017, stakeholders have charged directors of listed firms to streamline their business operations through backward integration strategies.
Quoted firms were encouraged to seek viable local content opportunities and indigenous production of commodities to solve problems emanating from inflationary pressures for guaranteed return on investment.
It is believed that if listed companies looked inward and source their materials locally, they would also develop smallholder farmers along the business chain and other rural traders in the long term.
Again, it would reduce, to the barest minimum, the exchange rate volatility and depreciation, which hurt economic performance by contracting output growth and inflation. Stakeholders, who spoke in an interview with The Guardian, linked part of the lull in the nation’s capital market to the failure on the part of companies’ board to initiating good policies that would help the management to drive the business. Indeed, they suggested that listed firms must adopt 100 per cent local sourcing of raw materials, noting that over dependence on foreign raw materials and exposure to foreign exchange has unfortunately, subjected firms to the vicissitudes of the Nigerian economy.Furthermore, they believed that local production would improve the performance of the listed companies and reflect on their share prices on the Nigerian Stock Exchange (NSE).
According to them, some board of directors have continued to invest on failing businesses that would never yield any dividend.For instance, the Managing Director of Trust Yield Securities, Rachidi Yusuf, explained that operators have adopted new measure to encouraging local production, firms by identifying local companies they can give necessary financial advice.
“We are encouraging local production, we are identifying local companies that we can give the necessary financial advice, financial back up and grow them to a level that you can encourage them to come and get listed on the stock Exchange.
“Most of these companies are having problems because of over dependence on foreign exchange either for their raw materials or technology and because there is shortage of foreign exchange, that is affecting them negatively.
“Since we are not sure when the resolution of that shortage will be, we are saying let them start looking inwards and a number of companies have started looking inwards they are now beginning to source their material locally and produce locally.
“Those kinds of companies we would start identifying them and encourage them to come to the exchange to get more companies producing what is needed by Nigeria.”The President, Independent Shareholders Association of Nigeria, Adeniyi Adebisi, submitted that if companies remain low performing or moribund for a number of years on end, the question needs to be asked what the directors and management of such companies are doing to turn the fortunes of their companies around.
“What has been observed is that many of those in authority of these companies seem complacent, and satisfied with enjoying the benefits of their offices not minding the fact that shareholders who are not within their circle are not receiving anything.
“Personnel in this category should realize that the main purpose of their enterprises is to manage the resources put under their care to make profit and declare dividends to their shareholders.
“Any board of directors and its management that cannot achieve this over a period of time should be removed. Where it is discovered that major shareholders are colluding with others to hold down their company with complacency and inefficiency, other shareholders, especially the small shareholders should make things uncomfortable for such board by insisting on effecting a change.
“There are provisions in the Companies and Allied Matters Act that protect the interests of minority shareholders in this aspect.“Companies that ‘chant’ ‘harsh economic environment’ year in year out as excuse for their inability to make profits and declare dividend to their shareholders should be viewed as suspects,” he added.
The National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, lamented that some stocks have remained at par value since the last few years, adding that these stocks have not in any way benefited the shareholders in terms of profitability which will manifest in dividends payment. He pointed out that most of the stocks at par value have failed to reward investors for several years. Therefore, there is no incentive to demand for them amidst competition from other good performing stocks
He noted that most insurance stocks fall under the category of non-performers, even as their condition worsened due to over exposure to the capital market during the meltdown.Okezie added that the time is ripe for listed companies that were yet to return to profitability to seek other investment options that would enhance growth.
The Nigerian Stock Exchange (NSE) All-Share Index fell by 0.13 per cent to close lower at 26,245.34 yesterday as the bears extended their control on the market. The equities remained under sell pressure towards consumer goods and oil and gas counters, leading to a decline of N11.3 billion in market capitalisation to close at N9.03 trillion.
The market had slipped into the bears’ territory on Tuesday, depreciating by 0.36 per cent following losses by highly capitalised stocks.
At the close of trading yesterday, the NSE ASI shed 0.13 per cent as stocks such as Forte Oil, Guinness Nigeria, Unilever Nigeria, Nestle Nigeria and Zenith Bank went down in value. A total of stocks shed weight compared with only 12 counters that appreciated. Guinness Nigeria Plc and Portland Paints and Products Nigeria Plc led the price losers with 5.0 per cent apiece to close at N63.65 and N1.71 respectively.
Diamond Bank Plc shed 4.8 per cent, just as Unilever Nigeria Plc and Transcorp Plc declined by 4.2 per cent and 3.3 per cent in that order. United Capital Plc lost 3.1 per cent as investors locked in profits recorded by the stock recently, closing at N3.39 per share. Other losers were: Neimeth (2.7 per cent); WAPIC Insurance Plc (1.8 per cent); Forte Oil Plc (1.8 per cent), Cadbury Nigeria Plc (1.4 per cent).
Cadbury will get a new managing director at the end of this month in the person of Mr. Muhammad Amir Shamsi. He will be replacing the current MD, Mr. Roy Naaman who was two years to reposition the company for better performance. Cadbury Nigeria Plc had hoped to consolidate its market share and tap into other expanding markets in West Africa with the appointment of Namaan.
However, Cadbury has not made significant progress since 2015. For instance, the company posted a decline of 46 per cent in profit after tax in 2015. Specifically, Cadbury Nigeria recorded a revenue of N27.825 billion for the year ended December 31, 2015, showing a decline of nine per cent from N30.518 billion, while profit after tax stood at N1.153 billion in 2015, down by 46 per cent to N2.137 billion in 2014.
The company is heading towards a dismal performance in 2016, having posted a loss for the nine months ended September 30, 2016.
Apparently weighing in on the current desperation by Nigerians to invest in the growing trend of Ponzi schemes, promising mouth-watering profits, the Central Bank of Nigeria (CBN) has warned Nigerians against the use of virtual currencies, including bitcoin, ripples, litecoin.
A statement issued on Tuesday by the CBN monitored on The Cable stated that virtual currencies are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions.
“The attention of bank and other financial institutions is hereby drawn to the above risks and you are required to take the following actions actions pending substantive regulation or decision by the CBN,” the statement read.
“Ensure that you do not use, hold, trade and/or transact in any way in virtual currencies. Ensure that existing customers that are virtual currency exchangers have effective capital AML/CFT controls that enable them to comply with customer identification, verification and transfer, monitoring requirements.
“Where banks or other financial institutions are not satisfied with the controls put in place by the virtual currency exchanger/customers, the relationship should be discontinued immediately. “Any suspicious transactions by these customers should immediately be reported to the Nigerian Finance Intellignece Unit (NFIU).”
The apex bank said anyone trading in bitcoin is doing so at his or her own risk. “The CBN reiterates that VCs such as bitcoin, ripples, monero, litecoin, dogecion, onecoin, etc., and similar products are not legal tenders in Nigeria.
“Thus, any bank or institution that transacts in such businesses does so at its own risk.” Bitcoin was the best performing currency of the year 2016. It has appreciated from four cents in 2010 to over $1,000 in 2017.
The CBN’s warning may have been provoked by an online website, Mavrodi Mondial Moneybox popularly known by its over 2m subscribers as MMM which recently posted a message on its site intimating its customers that it may be adopting the bitcoin in future transactions.
It a statement posted under the heading: MAVRO-50% IS AVAILABLE WHEN YOU PROVIDE HELP IN BITCOIN, the online website hinted that “From now on, there is an opportunity for all of the participants of MMM Nigeria to acquire Mavro-50% when you provide help in Bitcoin.
“Mavro-50% work under the same rules as Mavro-30%. For example, all bonuses are rewarding to them according to the normal procedure. Bitcoin is an international digital currency. Bitcoin transactions take a few seconds and the transaction fee is charged very low ($0.05).
“Bitcoin does not belong to any government, companies or particular persons, which allows you to be independent from the banks and to manage your money as you want. MMM and Bitcoin strives to beat social inequality and to make the world more fair. With the help of Bitcoin MMM participants can provide financial help to each other worldwide,” it concluded.
The Securities and Exchange Commission has commenced the Risk Based Supervision (RBS) model with the aim of establishing a more robust regulatory framework for the capital market, THISDAY gathered on Monday.
This comes as the commission has also approved a framework for the regulation of systematically Important Financial Institutions (SIFI) in the Nigerian capital, Abuja. The commencement of the RBS model followed the approval by the Minister of Finance, Mrs. Kemi Adeosun.
THISDAY had last week reported the imminent commencement of the RBS framework. While the RBS framework will be for all capital market operators (CMOs), the framework for the SITI is targeted at systemic non-bank financial institutions that are under the regulatory purview of the SEC, whose failure could cause contagion effects and significant disruptions to the wider Nigerian financial system.
It was gathered that in identifying a systematically important operator, SEC would enhance its regulatory supervision through on-site inspections to monitor the compliance level of operators. On the other hand, SEC had said in recognition of the importance of RBS, and to align its oversight functions with global trends and the guiding principles of the International Organisation of Securities Commission (IOSCO), it has adopted RBS into its supervisory process. This is to ensure that regulatory oversight is more effective, investor protection is advanced and systemic risk is mitigated.
Before now, the commission had operated the class minimum capital requirement for operators. Under the class minimum capital requirement, the commission set minimum capital requirements for all capital market functions without giving much consideration to the assets size and inherent risks.
As part of the adoption process, a RBS framework has been developed to serve as a guide for staff of its inspectorate division and would apply to the prudential supervision of all CMOs. This framework is a dynamic working document that will be reviewed on a regular basis and as the need arises to ensure that it remains relevant in achieving the supervisory objectives of the SEC. A market operator told THISDAY on Monday that under the RBS, SEC would consider key principles that are fundamental to the process.
“Sound supervisory and predictive judgment in identifying and evaluating risk is considered fundamental to the effective application of this framework. Capital market operators (CMOs) would be conducted on a consolidated basis, including subsidiaries and all related entities of the CMOs,” the operator said.
It was also gathered that the intensity, scope and frequency of supervisory scrutiny will depend on the composite risk rating of a CMO.
Also, the RBS highlights a risk assessment summary which would indicate the risk profile of a CMO and would serve as the basis for allocating regulatory resources for ongoing monitoring and supervisory efforts.
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.
