The Nation Newspaper

Category: Capital Market

  • How to reboot economy, by Adesina

    How to reboot economy, by Adesina

    By Lucas Ajanaku

    The economic repercussions of the coronavirus are expected to put Africa into its first recession in 25 years and could push 49.2 million people on the continent into extreme poverty by next year.

    The President, African Development Bank (AfDB), Akinwumi Adesina, who spoke during a press conference, laid out the top four priority areas that African countries should focus on to help economies across the continent rebound.

    Adesina said investing in infrastructure needs should remain at the top of the agenda as every year there is an infrastructure funding gap of between $68 billion and $108 billion across the continent. This, he said, remained a key impediment to Africa’s growth and is driving the Continent into debt. More needs to be done to foster an environment in which the private sector can carry a heavier burden in infrastructure investments, with a need to create more public-private partnerships.

    In particular, the COVID-19 crisis has highlighted the need to build up healthcare infrastructure across Africa to prepare for shocks, including future pandemics, Adesina said.

    “I don’t see the future of Africa’s youth in Europe or anywhere else. It must be in an Africa that is growing well, equitably, and able to create wealth and opportunities,” he said.

    The AfDB chief also stressed the need to close the energy gap because there couldn’t be any development without electricity, adding that this energy needs to be renewable.

    “We’re not investing in coal. Coal is gone,” he said.

    For example, AfDB has the $20 billion Desert to Power initiative in the Sahel region that is aimed at creating 10,000 megawatts of solar energy, which would make it the world’s largest solar power zone. He stressed that the continent has already committed to universal access to electricity by 2025.

    He said there is a need to mobilise capital on the continent. There are sovereign wealth and pension funds that invest in money market instruments outside of Africa. That money should be invested locally, he said.

    “Even if you earn money, even if you have a good rate of return, then you’re gonna pay people an annuity for the rest of their lives. And guess what? They are in places without water, without sanitation. … That is a miserable retirement,” Adesina said.

    AfDB is working to mobilise institutional investors in Africa to invest in the continent and optimise capital coming from diaspora communities, he added.

    The AfDB chief said any investments, such as those made in infrastructure, must be done with the aim of creating sustainable jobs. This year, between 24.6 million and 30 million jobs are expected to be lost as a result of the pandemic.

    “I don’t see the future of Africa’s youth in Europe at all. I don’t see it in the United States or anywhere else. It must be in an Africa that is growing well, equitably, and able to create wealth and opportunities for these young people,” he said.

  • Group seeks partnership on agric policies

    Group seeks partnership on agric policies

    By Daniel Essiet

     

    A group, Good News Development Association (GNDA), is seeking partnership with the Federal Government towards sustained investment in agriculture; food security and nutrition to reduce poverty and hunger. The GNDA as a group seeks to promote transformation of small-holder agriculture into farming as a business that thrives.

    Speaking at the unveiling of the GNDA’s cooperative society in conjunction with the Lagos State Agricultural Development Authority (LSADA), tagged: ‘Potential in agriculture,’ the Chairman, Mr. Barnabas Anyanwu, said  that  government’s continued  investment in agriculture would improve small scale farmers’ productivity and income through value chain development and encouragement of farmers’ cooperative groups.

    Anyanwu further said: “We call on Nigerians to embrace agriculture because it has helped the country in the time past and that’s where this nation would go back again. Also, government needs to help in the provision of facilities to prevent food wastage in the country. Sometimes on transit, the agriculture produce get spoilt before getting to the destination. Government should come up with good policy that would help Nigerian farmers guarantee food security, so they would continue to invest in the sector. We hear fantastic plans of government for agriculture but the reality is that, it has not gotten to the farmers,” he further said.

    Anyanwu noted that the group has acquired 31 acres of land for farming, processing and packaging of their agriculture produce. According to him, the plan is to have all enterprises in agriculture included in the process.

    “We are creating a hub where, you get all produces of agriculture, starting from processing, packaging, and marketing. Even foreigners can walk into the centre and find any type of agriculture produces they need,” he said.

    He commanded the Lagos State Agriculture Development Programme (LSADP), for guiding the group and support. “We have visited Bank of Industry and Bank of Agriculture, to find out, how they would support us financially,” he said.

    Director, Technical Service, LSADA, Ms. Ola Olajumoke, advised the group to make a difference by going to organic farming, which would give them edge over others in the country.

  • Global aviation needs 260,000 new pilots

    Global aviation needs 260,000 new pilots

    By Kelvin Osa Okunbor

     

    Global aviation industry would require about 260,000 new pilots in the next decade forecast by international civil aviation training specialist, CAE 2020-2029 Pilot Demand Outlook, has revealed.

    The global demand for new pilots continues to increase despite the COVID -19 pandemic toll on the current civil aviation market as players in the sector, including airlines, aircraft manufacturers and aviation training institutions look forward to rebound beginning from 2021.

    Despite pandemic shocks , investigations by The Nation revealed that prospective carriers in Nigerian aviation sector including Green Africa Airways , United Nigeria Airlines, Nigeria Air, Jet Airways and Value Jets are perfecting plans to acquire over 100 airplanes, which would require pilots to fly them.

    Besides the new entrants, existing carriers and some operators that suspended  operations are reactivating restart plans with aircraft orders , which would also require pilots in the strategic sector.

    While Green Africa Airways intends to acquire over Airbus  50 aircraft , confirming the need for more pilots, United Africa Ailines on its part plans to acquire Embraer regional jets with possibilities of creating employment opportunities  for pilots and other professionals.

    CAE Incorporated, which is a Canadian manufacturer of simulation technologies, modelling technologies and training services to airlines, aircraft manufacturers, healthcare specialists, and defence customers  said its forecast  indicates  that the active pilot population is expected to return to 2019 levels in 2022.

    The international training specialist said pilots  retirements and attrition are expected to become a challenge as air travel recovers and will create an “acute demand” with a short-term need for some 27,000 new pilots as of late 2021, growing to 260,000 over a 10-year period.

    In business aviation alone, CAE is predicting that 41,000 new pilots will be needed over the next decade to make up for anticipated retirements and attrition.

    This is projected as CAE notes the business aviation market is facing “massive retirements” as “the percentage of pilots over the age of 50 continues to increase versus the total civil aviation industry pilot pool. Currently, this pilot population age represents a disproportionately high rate.”

    It further sees the airlines scooping up a portion of business aviation pilots.

    On top of this, CAE projected a need for another 4,000 to accommodate growth for a total need of 45,000 new business aviation professional pilots over the forecast period.

    The airlines, meanwhile, need 126,000 new pilots to offset attrition and retirements and then 93,000 to accommodate growth.

    CAE acknowledged that the sudden drop in air travel demand hindered the industry’s growth trajectory. “Airlines and operators around the world have adjusted their operations to align with lower demand. Thousands of pilots have been furloughed in recent months,” the company noted. But it wondered whether this ultimately might play into stronger pilot needs in the future.

    “Many of them have pivoted to other professions and might not want to resume their pilot careers,” CAE said. “On the one hand, airlines and operators have reduced the pilot workforce to offset the financial impact of the pandemic. On the other hand, data indicates that the industry will face significant challenges in the upcoming years to meet the demand for pilots.”

    Read Also: 12 pilots evicted after police siege to Abuja hotel

     

    CAE said  fundamental factors driving pilot demand before the pandemic remain in place. “Age-based retirement combined with fleet growth were and remain the main drivers of pilot demand,” the company said. “Third-party analysis shows that commercial aviation and business aviation markets are forecast to continue growing over the next decade—over 11,000 additional business and commercial aircraft are expected to join the active world fleet during that period.”

    Of this, CAE anticipates that 3,600 additional aircraft will come from the business aviation market.

    The anticipated demand is  going to put pressure on the civil training industry, CAE said. “The industry is experiencing an unexpected change of course and facing unprecedented challenges, driving us to reconsider how we can develop and train better pilots,” it said.

    “One smart approach for coming together as an industry to meet the demand for pilots, as well as instructors, is to embrace training partnerships.”

    Finding adequate instructors was an issue before the pandemic, it added. “As growth returns to the industry, the availability of high-quality instructors will pose a challenge for years to come.”

    The training provider also expressed concern about a lack of funding for prospective students, noting that less than 10 percent of eligible aspiring pilots have access to direct funding.

    “Rather than leaving talent on the bench due to funding, we can work as facilitators for access to direct funding by educating the financial industry on the job outlook for pilots and the reality of training,” CAE said, pointing to its recent launch of a financing initiative in collaboration with financial institutions for prospective pilots.

    “With the 2020-2029 CAE Pilot Demand Outlook, we hope to arm the industry with the insights that will help the global aviation community understand, rethink, and learn about how to continue to build and grow the supply of highly qualified pilots as the industry emerges from the downturn,’’ said Nick Leontidis, group president of CAE’s Civil Aviation Training Solutions.

  • Companies get November 30 deadline for earnings results

    Companies get November 30 deadline for earnings results

    Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) has granted all public companies, capital market operators and other regulated entities a one-month extension for the submission of their latest quarterly financial statement.

    The apex capital market regulator stated that the extension was due to “the recent general disruption to business operations across the country and the challenges this may have posed on businesses”.

    According to the Commission, the disruption to business operations might have prevented public companies, capital market operators and other regulated entities from convening meetings for the purpose of considering quarterly financial statements that were due to be filed or released by October 30, 2020.

    Read Also: Why equities are rising, by NSE

     

    “In view of the above, the SEC hereby grants public companies, capital market operators and other regulated entities, a thirty-day grace period for the submission of their quarterly financial statements. The quarterly financial statements are now due for submission by Monday, November 30, 2020,” SEC stated.

    Public companies and other regulated companies at the capital market are required to submit their quarterly financial statement not more than 30 days after the end of the relevant quarter. Most companies use the Gregorian calendar as business year, thus the financial statement for the third quarter ended September 30, 2020 was due for submission on October 30, 2020.

     

  • SEC to sanction mutual funds for financial errors

    Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) will impose appropriate sanctions on collective investment schemes (CIS) for any errors in their audited accounts.

    The Commission stated that it shall henceforth discontinue the practice of issuing prior approval or no objection for audited accounts of collective investment schemes, otherwise known as mutual funds.

    Consequently, annual accounts of collective investment schemes upon completion of audit and auditor certification, shall be published within three months after the end of the period to which the accounts relate or any other period prescribed by the Commission from time to time.

    “Note however that any misstatements, misrepresentations, or otherwise, observed in the audited accounts of a collective investment scheme shall attract appropriate sanctions, including a requirement to restate the accounts in the scheme’s succeeding financial year, on the fund manager, trustee and auditor”, SEC stated.

    SEC noted that the changes in the audit approval process was in line with the provisions of section 169(2)&(3) and section 181(1)(f),(g) and (h) of the Investment and Securities Act 2007, and the importance of disseminating timely information to the market.

    Meanwhile, SEC has also tightened the registration requirements for new capital market operators as part of efforts to enhance the quality of operators in the capital market.

    According to the Commission, managing directors or chief executive officers of capital market operators who present sponsored individuals before the registration committee for interview would be required to provide a detailed brief about their companies, highlighting the contribution of the companies to the development of the Nigerian capital market.

    Under the enhanced framework, all registered sponsored individuals seeking to transfer their registration to a proposed capital market operator or a new firm would henceforth be required to undertake a fresh interview as against the current practice where they are granted an exemption.

    “Effective from January 2021, the pre-registration examinations for intending capital market operators conducted by the Nigerian Capital Market Institute would include essay questions,” SEC stated.

    The Commission noted that the changes were in line with section 38(2) of the Investments and Securities Act 2007 which empowers SEC to prescribe conditions for registration of capital market operators, including the level of knowledge and skill required to operate in the Nigerian capital market.

     

  • 10 Common Mistakes that Beginner Investors must Avoid

    10 Common Mistakes that Beginner Investors must Avoid

    Investment has become a necessary part of life in order to grow your wealth and achieve financial objectives. Due to rising inflation, it is becoming difficult to save enough to achieve simple financial goals like going on a vacation, buying household appliances.

    Most people don’t have enough income to have considerable savings for their future. Housing prices have risen considerably since 1970s worldwide with most people spending as high as 60-70% of their income on the house rents alone. Nigeria is seeing constantly rising inflation rate of 13.7%, with pressure from currency devaluation making everyday commodities unaffordable for most people.

    An average person today can’t even afford basic necessities let alone future goals. Today, it is more difficult than ever before to gain enough wealth to achieve long term goals like buying a house or retirement planning without considering investing.

    However, with planned investments into suitable instruments, individuals can build their financial future if the right steps and required precautions are taken.

    Due to a large number of options available and various pros and cons of each instrument, it can be quite difficult for beginners to make the right decisions regarding investments. Most of the new investors make common mistakes which makes them prone to heavy losses and unwanted outcomes.

    The following are the common mistakes that must be avoided by new investors in Nigeria for better outcomes.

    1. Over Investing

    Short term gains can be quite attractive for beginners which sometimes end up over investing in the initial days. Investment in any financial instrument involves a certain risk factor that must be considered before making any investment decisions.

    Investing more than you are willing to lose is a malpractice that must be avoided by all investors.

    Beginners must have a fixed proportion for savings and investment to achieve the predefined financial objectives. You should check the worthiness of investment while considering the risk to reward factor before jumping to any decision.

    1. Investing Without a Plan

    Investments should always be done according to a predefined plan after considering every financial aspect of your budget and analysis of various investment instruments.

    New Investors should make a plan with a preset allocation from the monthly earnings. The financial plan must cover every need and requirement along with setting aside emergency funds.

    Investors should stick with their financial plan with discipline and perseverance. The short-term volatility or personal desires must not interrupt the financial plan made to achieve a long-term goal.

    1. Setting Unrealistic Goals and Expectation

    Setting a realistic target is quite essential in the investment world as an investment without an objective will lead you nowhere. You should always have predefined financial goals and must make an investment plan to achieve those goals in the most convenient manner so that you don’t stop it.

    Goals and expectations must be realistic and should consider your risk-taking ability.

    Financial instruments that deliver high returns generally involve higher risk and one should not expect to gain tremendous returns without taking the risk.

    Investment is a slow and steady process and cannot make you rich within a month or a year. The expectations and target must be real while the path to achieve the target must be suitable and comfortable.

    1. Following Deceptive Advice & Recommendation

    Investors must keep a distance from the fraudsters in the financial markets that provide free or cheap advisory to cheat the inexperienced investors for self-interest. Investors should make the required efforts to check the legitimacy of the financial advisor they follow and the recommendations they take.

    Each product/instrument of every capital market is ideal for different types of investors. Hence, the advice and recommendations must be rechecked for the suitability and objectives of the investors.

    1. Investing Without Education & Understanding

    Knowledge and education about the chosen capital market & financial instrument can play an important role in enhancing the chances of positive outcomes.

    Beginner Investors must always avoid investing in complex instruments like Bitcoin or forex trading or CFDs on commodities, indices etc. which require deep understanding and years of market experience. In general, all investors must avoid any capital markets or financial instruments where they lack prior understanding, education and experience.

    Before investing in any of the financial instruments, make sure that you know its every aspect and are educated about the underlying capital market & its principles.

    The research and analysis of the chosen investment tool can assist in predicting its price movements & the potential factors that can affect its prices. New investors must also make effort to learn about the available features like stop-loss, leverage, etc. to make the most out of chosen capital markets.

    1. Not diversifying your investments

    An investment portfolio should always be well-diversified as investing the whole amount in a single investment can be risky at times. Diversification is a technique of spreading the invested amount into multiple instruments, tools, or industries to maintain consistency in returns while reducing the risk factor.

    Diversification reduces the risk exposure of investment towards any particular financial instrument. A single investment can face drastic outcome or deliver unfavorable returns due to any reason.

    However, if the investment is done in multiple ventures, the volatility of one instrument will most likely be balanced out by returns of other investments in the portfolio.

    1. Selecting a Wrong or Fake Brokerage

    The selection of a broker is one of the most important steps for investor safety. The broker acts as a medium between Investors and the Capital Markets. It provides a platform to carry out the investments.

    Each broker charges a different commission for offering trading and investment services which may also differ based on instrument offered.

    Brokers must be regulated by a government entity or regulator as they safeguard the investors and keep an eye on the activities of the broker. Choosing an unregulated broker may compromise your investments.

    African broker comparison website Forex Brokers SA recommends “Investors must check and compare all the available brokers in Nigeria and select the most ideal broker that is well regulated for the instrument you want to trade. It must have a good reputation, offer quality service, and charge reasonable fees.”

    “NSE authorized broker must be chosen if you are investing in stocks, while for trading Forex, Bitcoin or CFDs, investors must look out for reputed forex brokers that are regulated with multiple top tier regulatory authorities like FSCA in South Africa, FCA in the UK, ASIC in Australia, etc.”

    Some brokers offer multiple types of investment tools at varying charges while others have expertise in some particular tools. New investors must be careful while comparing the brokers and must make adequate efforts to choose the right broker for a safer investment experience.

    1. Investing with Emotions

    Involving emotions in investments is a common mistake that made by many beginner investors. Greed and fear are the most common emotion that generally force the inexperienced investors to buy at extreme high and sell at extreme low due to the fear of missing out or losing.

    The investors must not allow the emotions to interrupt their financial plan or financial objectives. Any investment decision that you make must be based on your research rather than emotions.

    1. Not Evaluating Performance/No Evaluation or Revamping

    Regular evaluation of the investment portfolio is an important step that is generally ignored by the most investors when they begin. It is important to regularly monitor the performance of the chosen investments and evaluate those.

    If any particular element in the portfolio is not performing well or is not suitable for the investment objective, then that must be removed while better performing tools must be added. Regular evaluation and revamping of the investment portfolio are required to weed out the unwanted elements while adding better-performing assets in the portfolio.

    1. Eyeing Quick Returns

    New and less experienced investors are more prone to fall for the quick return generating financial instruments and end up taking excessive risks in the market. Such mistakes can be dangerous for your capital as sometimes you could end up losing more than you would be willing to lose.

    The instruments that deliver significant returns in a shorter time period involve much high risks and are not suitable for most investors.

    In the End

    Investing early is a good step and it can be positive for you if done right, but can be drastic if precautionary measures are completely ignored.

    New investors are quite prone to face severe losses as they lack experience. It is always advisable for the first-time investors to spend more time learning the capital market and use demo accounts to gain experience before investing any real money.

  • Banks’ patronage at CBN’s liquidity window drops to N48b

    Banks’ patronage at CBN’s liquidity window drops to N48b

    By Collins Nweze

     

    The Central Bank of Nigeria (CBN) has said that daily patronage of the Standing Deposit Facility (SDF) by commercial and merchant banks has dropped to N48.32 billion.

    The apex bank’s industry report released at the weekend, showed that SDF decreased to an average daily amount of N48.32 billion in 251 transaction days , from N84.27 billion in 246 transaction days in the last one year.

    Also, the average daily request for Standing Lending Facility (SLF) was N81.06 billion in 238 transaction days, of which Intraday Liquidity Facility (ILF) conversion averaged N30.76 billion or 37.94 per cent of average daily requests.

    The CBN uses SDF and SLF to market industry liquidity and ensure that funds are accessed by banks in dire need of liquidity.

    The SLF is an overnight CBN credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value. Funds were sourced mainly from time, savings and foreign currency deposits, as well as accretion to unclassified assets.

    The funds were used, largely, to extend credit to the private sector and payment of claims on demand deposit. The rates for Standing Deposit Facilities (SDF) and SLF remained at nine and 16 per cent, respectively.

    The reduction in volume of transactions for the year was due to the change in remunerable SDF from N7.50 billion to N2.00 billion per day per participant.

    The report showed that average daily interest charged was N55.13 million. The previous  average daily request for SLF was N48.44 billion in 234 transaction days, of which ILF conversion was N30.43 billion or 62.82 per cent,  while average daily interest income stood at N35.81 million . The higher recourse to the lending window was traceable  market participants trying to access the SLF to meet their shortfalls and comply with CBN’s monetary and prudential requirements.

    During the review period, DMBs and merchant banks (MBs) had access to standing facilities to square-up their positions by borrowing at the Standing Lending Facility (SLF) or depositing excess funds at the Standing Deposit

    Facility (SDF) at the end of each business day.

    The trend showed more frequent recourse to the SLF, despite increased net system liquidity.

    The CBN also reduced remunerable threshold for daily deposits per institution at the SDF reduced to N2.00 billion from N7.50 billion.

    It said the reduction was to curtail unbridled requests by market participants and encourage inter-bank transactions and lending to the real economy. Applicable rates for the SLF and SDF were anchored to the downward review of the MPR, from 14.50 to 13.50 per cent.

    Analysis of the banking sector assets showed that total specified liquid assets of banks stood at N14.2 trillion at last October, representing 59.3 per cent of their total current liabilities.

    At that level, the liquidity ratio was 0.9 percentage point lower than the level at the end of the preceding month, and was 29.30 percentage points above the stipulated minimum liquidity ratio of 30 per cent.

    The loan-to-deposit ratio, at 61.9 per cent, was 0.3 percentage point below the level at the end of the preceding month and was lower than the maximum ratio of 80.0 per cent by 18.10 percentage points.

    Also, at N858.92 billion, the estimated federally-collected revenue (gross) in November 2019 fell below both the monthly budget estimate of N1,246.07 billion and the preceding month’s receipt of N894.09 billion by 31.1 per cent and 3.9 per cent, respectively. The decline, relative to the monthly budget estimate, was attributed to shortfall in both oil and non-oil revenues.

     

     

  • Stock Exchange delists Law Union and Rock Insurance

    Stock Exchange delists Law Union and Rock Insurance

    The Nigerian Stock Exchange (NSE) has delisted the entire issued share capital of Law Union and Rock Insurance, ending the insurance company’s three decades of public quotation on the main board of the stock market.

    Incorporated in June 1969, Law Union and Rock Insurance was listed on the NSE in July 1990.

    The delisting was sequel was sequel to the 100 per cent acquisition of Law Union and Rock Insurance by Kanuri LUR Limited, under a scheme of arrangement that that included voluntary delisting of the insurance company.

    The NSE had earlier placed Law Union and Rock Insurance under full suspension to prevent trading in the shares of the company beyond the effective date of the scheme of arrangement for the acquisition.

    The Exchange stated that the delisting followed the conclusion of the scheme of arrangement, and previous approval of the company’s application to delist its entire issued share capital from the NSE. The entire 4.296 billion ordinary shares of 50 kobo each outstanding in the name of Law Union and Rock Insurance were delisted from the Daily Official List of the Exchange on Thursday, November 06, 2020.

    The board of Law Union had earlier confirmed that it received a binding offer from Verod Capital seeking to acquire the entire 4.296 billion ordinary shares of 50 kobo each of Law Union at N1.23 per share. The offer thus valued Law Union at N5.28 billion.

    The offer price of N1.23 per share represented a premium of 208 per cent on the 60-day volume weighted average share price and 140 per cent on Law Union’s closing share price on February 26, 2020.

    Verod Capital focuses on investing equity and equity-linked capital in growth companies across various consumer-driven sectors in Nigeria, especially the insurance sector.

    Insurance companies are in a hot race to raise new equity capital to meet new minimum capital requirements for various insurance functions as directed by NAICOM. NAICOM had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level. The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.

     

  • Investors await ‘big banks’ third quarter results

    Investors await ‘big banks’ third quarter results

    By Taofik Salako, Deputy Group Business Editor

     

    Speculative trading on the shares of Nigeria’s leading banks has increased substantially as investors anxiously await third quarter earnings of Nigeria’s largest banks.

    Five leading banks-Guaranty Trust Bank (GTBank), Zenith Bank, United Bank for Africa (UBA), Access Bank and FBN Holdings, are expected to release their third quarter earnings in the next few days. The five first-tier banks, which control more than two-thirds of the banking industry, traditionally have major influence on the direction of the investment market.

    The Nation’s check at the weekend indicated that all the banks have concluded arrangements for the release of the nine-month results, which most pundits expected to give clearer pointer of the earnings trend for the fiscal year 2020.

    The first-tier banks have dominated trading activities at the stock market in recent period, as investors take positions ahead of the release of the third quarter results. Last week, the trio of Access Bank, FBN Holding and Zenith Bank were the three most active stocks at the Nigerian Stock Exchange (NSE), accounting for 33.2 per cent of the total turnover for the week.

    Analysts agreed that third quarter earnings of the ‘big banks’ would have a major influence on the overall share pricing trend in the next few days.

    Analysts at Cordros Securities said they expected “investors to shift their attention to yet to be published results from the big banks in the week ahead”.

    Nigeria’s seven topmost banks had grossed N1.77 trillion as top-line earnings in the first half of 2020 despite the COVID-19 lockdowns that disrupted activities for the most part of the period.

    The seven first tier banks included Guaranty Trust Bank (GTBank), Zenith Bank Plc, Stanbic IBTC Holdings, Access Bank, United Bank for Africa (UBA), FBN Holdings and Union Bank of Nigeria (UBN). They account for more than three quarters of the Nigerian banking industry and are generally refer to as systemically important banks, in reverence to their size and operations.

    Total gross earnings within the top seven banking group had risen by 7.8 per cent to N1.77 trillion in first half 2020 compared with N1.65 trillion recorded in corresponding period of 2019. Total pre-tax profit dropped marginally by 0.74 per cent from N463.79 billion in first half 2019 to N460.38 billion in first half 2020, driven largely by steep decline in the profit of a bank. Profit after tax rose by 10.13 per cent from N388.87 billion to N428.29 billion.

    However, the underlying profit-making capacity of the sector declined during the period with average pre-tax profit margin for the top seven banking group dropping from 28.46 per cent in first half 2019 to 26.94 per cent in first half 2020. With the exception of Stanbic IBTC Holdings and FBN Holdings, the two bank-led holding companies within the group, all the other banks suffered decline in underlying profitability. Nigerian banks are required by extant regulations to maintain the Gregorian calendar year as their financial year, with half year ending June 30, every year.

    A market intelligence report by The Nation had shown that GTB, Nigeria’s most capitalised financial institution, remained the most profitable with a pre-tax profit margin of 48.73 per cent in first half 2020, more than three basis points below 52.19 per cent recorded in first half 2019. Stanbic IBTC Holdings recorded the biggest improvement with pre-tax profit margin rising from 38.04 per cent to 41.41 per cent. FBN Holdings’ pre-tax profit margin also improved from 12.93 per cent to 13.97 per cent.

    In actual figures, Access Bank had displaced Zenith Bank to emerge with the highest gross earnings but Zenith Bank also displaced GTBank to assume the lead in actual pre and post tax profits. Access Bank’s gross earnings rose from N324.38 billion to N396.76 billion. Zenith Bank’s profit before tax rose from N111.7 billion to N114.12 billion while profit after tax increased from N88.88 billion to N103.83 billion.

    The two leading banks- GTB and Zenith Bank, generally recorded above-average performance across major indices.

    On the basis of the first half results,  GTBank and Zenith Bank distributed interim dividend per share of 30 kobo. Stanbic IBTC Holdings paid the highest interim dividend of 40 kobo per share. Access Bank retained its 25 kobo per share while UBA distributed interim dividend of 17 kobo per share.

     

  • Fixed income, currency markets drop to N164.32tr in Q3

    Fixed income, currency markets drop to N164.32tr in Q3

    Turnover in the Nigerian fixed income and currency (FIC) markets dropped by 26.76 per cent to N14.07 trillion in September 2020, according to latest trading figures released at the weekend. Turnover at the FIC markets for the nine-month period ended September 30, 2020, declined by 7.69 per cent to N164.32 trillion by third quarter 2020 as against N178.0trillion recorded by third quarter 2019.

    Transaction report and analysis for the month ended September 30, 2020 released at the weekend by FMDQ Exchange showed that total turnover in the fixed income and currency markets declined to N14.07 trillion in September 2020 compared with N19.21 trillion, a decrease of N5.14 trillion. The performance in September 2020 also represented a drop of 1.33 or N0.19 trillion from N14.26 trillion recorded in August 2020.

    OMO bills and foreign exchange transactions were the highest contributors to the FIC markets in September 2020, jointly accounting for 54.48 per cent of the total FIC market turnover.

    Total foreign exchange (forex) market turnover in September 2020 was $8.66 billion or N3.34 trillion, representing a decrease of 11.27 per cent or $1.10 billion from $9.76 billion or N3.76 trillion recorded in August 2020. The Central Bank of Nigeria (CBN) official spot forex rate closed at an average of $/N379.04, representing a 0.37 per cent or $/N1.39 appreciation of the exchange rate from $/N380.43 recorded in August 2020.

    At the Investors’ and Exporters’ (I&E) forex window, the naira appreciated against the dollar, gaining 0.06 per cent or $/N0.25 to close at an average of $/N386.01 in September 2020.

    Similarly, in the parallel market, the naira appreciated against the dollar gaining 3.90 per cent or $/N18.55) to close at an average of $/N456.74 last September.

    Liquidity challenges in the forex market persisted, despite the interventions by the Central Bank of Nigeria (CBN) in form of forex sales to banks which are the dealing members.

    Analysis of forex market turnover indicates that derivatives turnover decreased by 28.94 per cent or $2.04 billion while forex Spot turnover increased by 34.69 per cent or $0.94 billion in September.

    In the OTC Forex Futures market, the near month contract-NGUS September 30, 2020 with a total outstanding notional value of $1.54 billion matured and was settled, while a new long-term 60-month contract, NGUS September 24 2025 was introduced at a rate of $/N589.09.

    The total notional value of open OTC Forex Futures contracts as at September 30, 2020 stood at $11.13 billion, representing a 9.81 per cent decrease on the $12.34 billion notional value of open contracts as at August 31, 2020. This continued the downward trend in the notional values of open contracts since May 2020.

    The total notional value of OTC Forex Futures contracts traded since inception stood at $50.41 billion as at September 30, 2020.

    In the primary market, average discount rates for the 91-day and 182-day Treasury bills (T.bills) both decreased nu eight basis points to 1.09 per cent and 1.51 per cent respectively in September 2020, while the average discount rates for the 364-day T.bill decreased by 30 basis points to 2.97 per cent in September 2020. Similarly, the discount rates for OMO bills decreased by an average of three basis points to close at a range of 4.86 per cent to 8.92 per cent in September 2020.

    In the primary market for sovereign bonds, the marginal rates for Federal Government of Nigeria (FGN) bonds decreased by an average of 84 basis points to close at a range of 6.00 per cent to 8.94 per cent  in September 2020.

    The total value of T.bills and OMO bills outstanding as at September 30, 2020 decreased by 1.45 per cent and 12.13 per cent to N2.72 trillion and N7.46 trillion respectively, while the total value of FGN bonds outstanding as at September 30, 2020 increased by 1.05 per cent to N10.54 trillion, leading to a 0.44 per cent increase in local public debt to N13.62 trillion as at September 30, 2020. This represented an increase of 16.01 per cent relative to September 2019.

    Turnover for T.bills and OMO bills increased by 36.70 per cent and 11.34 per cent to N1.49 trillion and N4.32 trillion respectively, resulting in an increase in trading intensity to 0.54 for both securities in September 2020 from 0.40 and 0.44 respectively in August 2020. Conversely, FGN Bonds turnover decreased by 8.12 per cent to N2.15 trillion in September 2020, resulting in a marginal decrease in its trading intensity to 0.21 as against 0.23 in August 2020.

    There was a general decrease in yields across the sovereign yield curve between August and September 2020 except on the three-month tenor of the curve. Furthermore, the highest spreads were recorded on the securities with two-year and three-year maturities. Weighted average yields on short-term, medium-term and long-term maturities decreased by 5.18 per cent, 1.27 per cent and 0.24 per cent respectively in September 2020. Also, inflation-adjusted yields remained negative across the short, medium and long-term tenors in September 2020.