The FGN savings bond was introduced into the market on March 7, 2017 as a result of market restructuring that saw the upward review of the minimum subscription for treasury bills and bonds in the primary market from N10,000 to N50m. This means that investors or group of investors that cannot come up with the minimum subscription of N50m will have to buy from the secondary market, or subscribe to the FGN savings bonds that have much lower minimum subscription requirements of N5,000 minimum.
READ: Understanding the FGN savings bonds Before I proceed further, I want to make further clarifications regarding some terms based on questions and feedback I have received so far. The primary market is where you buy directly from the issuer. It is like buying drinks directly from the manufacturer (wholesale). You do that by going through your bank, stock broker or discount house. The secondary market is where you buy from someone who bought from the primary market and wants to re-sell (retail). It is like going to a supermarket to buy drinks – you are buying from someone who bought from the manufacturer.
Brokers usually deal with both primary market and secondary market transactions. That means you do not have to look for another broker when you want to trade in the secondary market, unless you have reasons to. For example, the broker also has a minimum amount they sell to the public based on who their target clients are. It is possible that the minimum amount the broker is ready to accept is too high for you. In that case, you need to look for another broker that will accept the amount you have. If you still cannot find one, then you may have to save up until your money is enough. There are investment products you can use to save monthly until you arrive at the amount you want.
Investing in FGN savings bond
Investing in FGN savings bond is as simple as visiting one of the stock broking firms accredited by the Debt Management Office and fill out the required forms. The DMO is responsible for issuing bonds on behalf of the Federal Government. You can download the current list by visiting the DMO website, www.dmo.gov.ng. You will be required by the stockbroker to open an account with them so that you can deal through them (if you do not have a stockbroker who is already is accredited). Whether you end up opening the account or not, you will be better informed than someone sitting at home asking questions but doing nothing. Taking that first step seems to be the biggest challenge people have.
Investing in fixed income securities is virtually risk-free, so there is no point analysing endlessly an investment that carries no risk. It does not make sense. What should concern you is how to enter, how to exit and how investing in bonds fits into your financial goals and plan. You must have a reason for wanting to invest in bonds. Once you are clear, just step forward and take action. Any additional questions you may have will be answered by the broker.
FGN savings bond is issued by the DMO on behalf of the Federal Government of Nigeria, targeted at low-income earners to encourage savings and to earn income (interest) at competitive rates. The interest earned on FGN savings bond is tax free. This means you can grow your money faster.
Interest earned from FGN savings bond is paid quarterly – every three months – into your account as indicated in the submitted subscription form. The interest is calculated per annum (year). This means if you invest N100,000 in FGN savings bond at 13 per cent, you will be paid N13,000 per year. That means every three months, you will get a credit alert of N3,250, which adds up to N13,000 per year. If you think the interest is too small, you need to increase your investment. That may require you to start saving more and consistently rather than spend on things that will not improve your future. If you are focused, you can keep growing your money to the point that your interest is enough to feed your family.
Minimum subscription for FGN savings bond is N5,000 with a maximum of N50m. Some brokers may not accept N5,000 as stated earlier. You will be told the minimum they accept. If you do not have enough money, you can check with another broker. You can simply call them to find out rather than go door to door. Also, it is better to save up your money to a reasonable amount before you invest in bonds because if the interest is too small, you will be discouraged.
The tenor of FGN savings bond is two to three years. The interest rate is determined by the issuer and is usually stated in the offer for subscription adverts. Offer for subscription is open to the public and it takes place every month, and usually lasts for a week. During that time, you can visit your stockbroker to fill out your subscription form and fund your account. After close of subscription, you will be notified if your subscription was successful. You can decide to take part in every subscription or add your money together and subscribe once in a while. It is important you have a goal you are working towards so that you invest with a plan and focus.
If you want your money to grow faster, you can add your interest to your savings account and use it to buy another bond later, rather than spending the money. If you grow your interest big enough, it becomes another source of income you can fall back on in future, in the event you lose your job or your pension income is not enough to support you.
Unilever Nigeria Plc has announced improved financial performance for the first quarter (Q1) ended March 31, 2017. The results showed increases in both top and bottom-lines, raising expectations of stakeholders for a better performance at the end of the current year.
Unilever reported a revenue of N22.172 billion for Q1 of 2017, showing an increase of 32 per cent compared with N16.782 billion in the corresponding period of 2016. Cost of sales rose by 47 per cent from N10.749 billion to N15.879 billion, making the company to end the period with gross profit of N6.293 billion as against N6.033 billion in 2016.
Sales and distribution expenses went up by 23 per cent, while market and administrative costs fell by 22 per cent from N3.355 billion to N2.596 billion in 2017. However, finance costs increased by 32 per cent to N724 million, from N545 million. Profit before tax (PBT) improved by 53 per cent from N1.419 billion to N2.80 billion, while profit after tax (PAT) went up from N1.041 billion to N1.603 billion.
The company said it remained a consumer and customercentric business, as it continues to meet varying needs of Nigerians.
“The company will not relent in its efforts to satisfy its consumers. As a company, we will continue to deploy best practice marketing strategies, with high level of operational intensity; in our continued investment in commercial and factory operations to expand our capacity and grow our market share,” the company said.
In their assessment of the results, analysts at FBN Quest said compared with their estimates, Q1 sales were ahead by 17 per cent while PBT and PAT were ahead by wider margins, mainly due to the positive surprise on the sales line.
“On an annualised basis, while sales are tracking ahead of consensus full year estimate of N76 billion by 16 per cent, PBT and PAT are ahead by 87 per cent on average. Although forex exchange sourcing for raw material importation remains a challenge, any adverse effect has been offset by positives seen in the topline. We continue to believe that the larger consumer goods companies (like Unilever) are benefiting from weaker competition and thus able to grow market share,” they said.
Last week, Unilever announced plans to raise N63 billion via a rights issue and FBN Quest said: We believe the company intends to de-leverage its balance sheet and partly raise funds for planned local manufacturing capacity expansion for its personal care business in the South-West region.”
Amidst the bearish trend at the stock market, capital growth recorded by some companies at the end of first quarter (Q1) beat inflation figures and fetched investors positive return on their investments. While the Nigerian Stock Exchange (NSE) All Share Index, which is the benchmark gauge for the equities market performance ended the Q1 with a decline of 5.1 per cent, most of the other sectoral indices recorded worst decline. Similarly, most of the stocks are in red, with some recording depreciated above 30 per cent.
When the Nigerian Bureau of Statistics (NBS) released the inflation rate for March, it was 17.26 per cent, meaning that most investors in the stock market are counting losses. However, THISDAY checks revealed that some of the investors have witnessed positive returns on their investments amidst the rampaging bears. These investors recorded returns that are higher than the inflation rate, meaning that they are still recording positive returns on their investments.
Investors in Beta Glass Company Plc recorded the highest return of 46 per cent, followed by Airline Services and Logistics Plc with 42.4 per cent. Those in United Bank for Africa Plc (UBA) witnessed a growth of 28.2 per cent, while Okomu Oil Palm Plc fetched its investors 24.4 per cent. Stanbic IBTC Holdings Plc ended the March with 20 per cent, which is higher than the inflation rate.
Some market operators said more stocks would provide positive returns to investors once the operating environment improves following efforts by the government. Market analysts are also not surprised that stocks of UBA and Stanbic recorded positive growth in Q1 given their financial results for 2016. Both financial institutions recorded high profit growth compared to other banks. Stanbic IBTC recorded a growth of 51 per cent in profit while that of UBA rose by 32 per cent. The Group Managing Director and Chief Executive Officer of UBA, Kennedy Uzoka, had attributed the impressive results to focus on operational efficiencies.
“Given the operating environment in 2016, I am very pleased with our profitability – an impressive 32 per cent growth in PBT to N91 billion – whilst we have also focused keenly on operational efficiencies, illustrated by the reduction in our cost-to-income ratio.” Uzoka said. He had assured stakeholders of better further performance, saying “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.”
The hope of shareholders of Forte Oil Plc to receive dividend at the end of the current financial year has brightened as the company reported improved results for the first quarter(Q1) ended March 31, 2017.
Shareholders of the oil firm did not receive any dividend for 2016 due to a 50 per cent decline in its profit. However, going by the Q1 results, there is light at the end of the tunnel. Forte Oil reported a profit after tax (PAT) of 1.9 billion in Q1 of 2017, showing a jump of 98 per cent from N1.0 billion recorded in the corresponding period of 2016.
In all, Forte Oil recorded a revenue of N33 billion, down 7.3 per cent from N35.67 billion. Cost of sales was reduced by 11.7 per cent from N30.8 billion to N27.2 billion, while distribution expenses was reduced by 45 per cent from N911 million to N501 million, leading to a growth of 20.8 per cent in gross profit to N5.8 billion, from N4.8 billion in 2015.
Operation expenses declined by 9.8 per cent to N2.8 billion, from N3.1 billion, net finance cost rose by 37 per cent from N1.1 billion to N1.6 billion. The company posted post tax profit of N2.0 billion, up 57.5 per cent from N1.3 billion. A reduction in tax by 52 per cent from N300 million to N200 million made the profit after tax to grow fast to N1.9 billion in 2017, compared with N1.0 billion in 2016, showing a jump of 97.5 per cent. In bid to reduce its finance cost, Forte Oil Plc last year raised N9 billion bond under its N50 billion bond issuance programme, to refinance existing short term commercial bank loan obligations. The funds were also meant to refinance its retail outlet expansion.
The Group Chief Executive Officer, Forte Oil, Mr. Akin Akinfemiwa had said: “With the raising of this initial capital which has been fully underwritten shows the confidence the investing public has in Forte Oil Plc as an investment of choice. This bond programme being the first in the downstream sector, is testament to Forte’s position within the downstream sector and allows the company to actualise the vision of the Board to continue to provide value to its shareholders regardless of the economic climate.
Also speaking on the bond issuance, the Group Executive Director, Finance and Risk Management, Forte Mr. Julius Omodayo-Owotuga said: “This series provides us with the necessary liquidity to actualize our growth strategies and positions the company for the years ahead. The pricing of this debt instrument demonstrates the markets’ belief in us and the pricing would help reduce our borrowing cost and increase profitability in the short and long term.”
The Central Bank of Nigeria has introduced “Form X” for the Small and Medium-scale Enterprises seeking to purchase foreign exchange from the apex bank.
The CBN said the decision was part of its commitment to increase forex liquidity and improve access by the SMEs and retail businesses to forex.
The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, who confirmed this on Monday, said that the measure was intended to ease documentation challenges usually encountered by this category of businesses.
He further explained that the new form, which must be completed by all the SME applicants required the applicant to fill the form with a supporting application letter as well as beneficiary invoice and bank wire transfer.
The objective of the new guideline, he added, was to remove obstacles usually encountered by those whose forex needs for either visibles or invisibles were as small as or less than $10,000.
He reiterated the apex bank’s determination to continue to ensure adequate supply of forex for genuine transactions in the coming days.
The introduction of the ‘’Form X” was coming barely one week after the CBN opened a special forex window for the SMEs.
Meanwhile, the naira closed at 410/dollar on the parallel market on Monday, the last day of the Easter holidays.
Despite the series of dollar supplies into the various segments of the forex market by the central bank, the naira had closed at 410 against the United States dollar from Friday to Sunday, fuelling concerns about the CBN dollar interventions.
Earlier, the local unit had also closed at 410/dollar consecutively from last Tuesday to last Thursday.
Deposit Money Banks lacked naira liquidity to bid for the $100m offered for sale by the CBN last Thursday.
Banks were unable to buy over $39m out of the $100m offered for bid by the apex bank.
The CBN is reportedly planning to raise dollar sales to the BDCs to $40,000 from the present $20,000, which will improve liquidity and help support the local currency.
The Asset Management Corporation of Nigeria has taken over Rockson Engineering Limited, Ojemai Investment Limited and Ojemai Farms, two firms linked to the former Chairman of Arik Air, Sir Joseph Arumemi-Ikhide.
According to the corporation, Rockson Engineering is indebted to it to the tune of N107bn; Ojemai Investment, N1.9bn; and Ojemai Farms, N8.6bn.
Arik Air’s total debt is also put at about N387bn.
The Head of Corporate Communications, AMCON, Mr. Jude Nwauzor, confirmed the takeover of the firms to one of our correspondents in Lagos on Wednesday.
In an affidavit deposed to by the Receiver Manager of Arik Air, Mr. Oluseye Opasanya, before a Federal High Court in Lagos, the airlines’s total indebtedness was put at N387bn.
According to the affidavit, in addition to about N375bn owed locally, the airline also owes aviation authorities in the West Coast of Africa about $6.5m and Lufthansa Technik Group about €31m.
A breakdown of Arik’s debt within the country showed that the airline owes N418m as arrears of unpaid insurance premium for its airplanes, due on February 10, 2017.
According to the document, a demand letter from the National Pension Commission also showed that the airline failed to remit pension contributions of its employees despite making the necessary deductions from their salaries, and so owes the commission the sum of N4.586bn.
Other debts by the airline are N28.364bn to Zenith Bank Plc; N9.447bn to Access Bank Plc; N632m to Amadeus Marketing Nigeria, an aviation service provider; and N3.8m to Marriot Hotel and Best Western Hotel for the accommodation of its engineers and members of staff.
It was also revealed that the erstwhile management of the airline obtained N2bn to retrofit from AMCON without documentation.
The affidavit alleged that the former management of Arik was basically gambling with the lives of millions of people that patronised the airline, because it did not care about safety as critical issues such as having a simulator to ensure that Arik pilots undertook mandatory training as required to improve their efficiency, were non-existent.
It added that the airline had inadequate equipment to facilitate its operations, which was reflected by the insufficient laptops available at its check-in counters to conduct basic checks.
Nwauzor stated, “The airline uses a minimum of 48 tyres every month, but when AMCON took over, there were no spares.
“As a matter of fact, the salaries of the expatriate and local staff of Arik were unpaid, while the airline owed premiums on its insurance policy because the previous management of Arik took insurance on a monthly basis instead of annually in accordance with aviation global best practices for the insurance of aviation assets.
“Arik operations would have been grounded indefinitely if AMCON did not intervene as the insurance policy of Arik was to lapse on February 10, 2017. As of that date, Arik owed a total of N418m in arrears of unpaid premium, just as its employees’ health insurance had also expired and as a result, the pilots and other members of staff of the airline were to halt operations as well.”
He added that AMCON took over to underscore the government’s decision to instil sanity in the nation’s aviation sector and prevent a major catastrophe, adding that it underestimated the rot in the airline’s system before the takeover.
According to him, the government has so far spent about N1.5bn since AMCON took over in February to revive the airline, which he said was on the verge of shutting down.
“Even if we had given the former management the next 25 years, they will still not have been able to get out of debt. The National Assembly wanted AMCON to move in, liquidate the company and recover the debts owed. That option is still open to us,” Nwauzor added.
The court document stated that among other shortcomings, Arik operated without any pattern of corporate governance, had a very poor business judgment, poor record keeping and lacked proper accounting and auditing.
The Federal Government is talking to the World Bank and African Development Bank for $3bn loans before it determines how much it will raise from Eurobonds to help fund this year’s budget.
“From the World Bank, we are hoping to get $2bn,” the Minister of State for Budget and National Planning, Zainab Ahmed, said in an interview on Tuesday in Abuja, Bloomberg reported on Wednesday.
While the African Development Bank in November disbursed $600m of a $1bn loan, the Federal Government wants the Abidjan-based lender to top up the remaining $400m.
“We are talking to see whether they can up it to $1bn,” she said.
Lawmakers are debating the 2017 budget of a record N7.3tn that the Budget ministry said would help to boost an economy that shrunk by 1.5 per cent last year, the first contraction since 1991.
This came after lower prices and production of oil and shortages of both foreign currency and power weighed on output.
The government raised $1bn of Eurobonds in February and a further $500m last month to finance projects approved in the 2016 budget.
Ahmed said the government would return to the market for a new fundraising round for this year’s spending plans.
Yields on the bonds sold in February and maturing in 2032 were little changed at 7.23 per cent as of 1pm on Wednesday.
“We should be able to do higher than what we borrowed in 2016,” she said.
“It will be determined by how much we get from the World Bank and African Development Bank because that’s a lower rate. Our preference is always to get the lower rate first.”
President Muhammadu Buhari on Wednesday forwarded the names of five nominees to the Senate for confirmation as non-executive directors of the Central Bank of Nigeria.
According to a statement by the Special Adviser to the President on Media and Publicity, Mr. Femi Adesina, the nominees were picked from five of the six geopolitical zones of the country.
The statement read in part, “In accordance with Sections 6 (1) (d) and 10 (1) and (2) of the Central Bank of Nigeria (Establishment) Act, 2007, President Muhammadu Buhari, Wednesday, forwarded the list of his nominees to the Senate for confirmation as non-executive directors on the Board of the Central Bank of Nigeria.
“The letter to the Senate President, Abubakar Bukola Saraki, contained the following as the nominees and their geopolitical zones: Prof. Ummu Ahmed Jalingo, North-East; Prof. Justitia Odinakachukwu Nnabuko, South-East; Prof. Mike I. Obadan, South-South; Dr. Abdu Abubakar, North-West; and Adeola Adetunji, South-West.”
THE Nigerian Economic Summit Group, NESG, yesterday, gave an insight into why Nigeria experienced trade deficit of N290 billion in 2016, even as it projected that the economy will experience a Gross Domestic Product, GDP growth rate of 0.6 per cent. Speaking during the 21st Annual General Meeting of the NESG, chairman of the Group, Mr. Kyari Bukar, said that the lower crude oil prices and inability of the country to finance its rising import bills in the face of plummeting non-oil export led Nigeria’s trade balance to a deficit of N290 billion while balance of payment deficit climbed to N1.8 trillion in the third quarter of 2016. Bukar hinted that aside from the foreign exchange crisis, the inability of government to respond swiftly and appropriately to economic challenges worsened the situation.
“For instance, the delayed passage of the 2016 budget and cloudy policy direction increased the level of uncertainty in the business environment. This also resulted in a decline in foreign direct investments which closed below $1 billion in the year. Major economic sectors such as construction, manufacturing and oil and gas also contracted by six percent, four percent and 14 percent respectively in the year.” “In terms of competitiveness, Nigeria fell three places to 127th in the 2016- 2017 World Economic Forum Global Competitiveness Rankings. According to the GCR report, the five most problematic factors for doing business in Nigeria are inadequate supply of infrastructure, corruption, access to financing, foreign currency regulations and policy instability.” Bukar expressed confidence that the year 2017 will witness GDP growth even as he prayed for sustained peace in the Niger Delta to guarantee improvement in government revenue which is crucial for payment of salaries and infrastructure development.
On his part, the Chief Executive Officer of NESG, Mr. Laoye Jaiyeola disclosed that NESG has been working rigorously to support government’s policy response to the foreign exchange crisis and its negative impact on manufacturing, and economic activities in general. “There is need for all hands to be on deck. In particular, there is an important complementary role that the private sector needs to play in order for us to stem the tide of decline. Let me use this opportunity to reiterate NESG’s commitment to remain at the fore of advocacy and intervention on all issues regarding the adoption of policies conducive for good governance and sustainable private sector led economic development in 2017.”
THE Nigerian Stock Exchange, NSE, yesterday, directed managers of Real Estate Investment Trusts, REITS, and closed-end funds listed on the NSE to henceforth file quarterly and audited full year financial statements as part of new rules being proposed by the Exchange.
The NSE also said that REITs and closed-end funds listed on the Exchange would be expected to submit their key performance metrics on a weekly basis. In a notice on its website, the NSE said the financial statements and other performance metrics would be available to the public via its website and other NSE platforms.
It added that REITs and closed end funds listed on the Exchange will be reclassified from the Main Board to a separate board specially created for them under the equities market. “In addition, the fund managers will be required to post the information on their website. The information to be provided will include: net asset value (NAV), number of properties, property type/distribution, occupancy rates, delinquency rates on rents and average property age.”
The NSE stated that the proposed changes, which will be implemented over the next three quarters of 2017, are aimed at promoting transparency, disclosure, visibility and liquidity of listed REITs and closed end funds in the market. The changes will also make it easier for existing and potential investors to access information required to make investment decisions thereby contributing to the growth of these products in our market.
While saying that it planned to host the first REITs Workshop before the end of the second quarter of 2017, to further engage with the relevant stakeholders within the market .
