The Nation Newspaper

Category: Capital Market

  • Nigeria’s debts may rise to N34 trillion in Q3

    Nigeria’s debts may rise to N34 trillion in Q3

    By Taofik Salako, Deputy Group Business Editor

    Nigeria’s public debts may continue its quarterly increase to hit about N34 trillion in the third quarter ending September 30.

    Data provided by the Debt Management Office (DMO) had shown that the nation’s public debt had risen by 8.3 per cent or N2.38 trillion to close the second quarter 2020 at N31.01 trillion. The second quarter increase was due to combined foreign and domestic loans during the period.

    The Federal Government had in the second quarter secured N1.21 trillion or $3.36 billion budget support loan from the International Monetary Fund (IMF). the government also issued new domestic conventional bonds valued at N666.76 billion in addition to non-interest Sukuk bond of N162.56 billion. It also issued promissory notes of about N255.42 billion to settle claims of exporters.

    In many reviews at the weekend, leadng investment banking groups said Nigeria’s public debts will continue on the upward trajectory in the third quarter.

    In one review, Cordros Group indicated that Nigeria’s public debt may continue on the upward as the government struggles with declining revenue amid bloated expenditures.

    The report indicated that with Nigeria expected to access more foreign loans from the World Bank, African Development Bank (AfDB) and Islamic Development Bank (IDB) as well as continuing domestic issuances, public debt stocks may rise by 4.8 per cent to about N32.50 trillion by September ending. Other reports indicated that the loan portfolio may close around N34 trillion citing devaluation effect.

    The loans during the third quarter include multilateral loans of $1.5 billion from the World Bank, $211.5 million from AfDB and $113 million from IDB. Domestic issuances, including the monthly Federal Government of Nigeria Savings Bond (FGNSB) are expected to top N588.9 billion while state governments may close the shelf with borrowings of about N200 billion.

    “Faced with the severe impact of COVID-19 on all economic units, the government has grappled with low revenue in the face of increasing expenditure to limit the impact of the pandemic on the economy,” Cordros Group stated.

    Data provided by DMO showed that external debts accounted for 36.65 per cent of Nigeria’s total public debt by the end of the period ended June 30, 2020. This consisted of 31.68 per cent for the Federal Government and 4.96 per cent for the state governments. Domestic debts accounted for 63.35 per cent. Of the N19.65 trillion domestic debts, the Federal Government accounted for N15.46 trillion while states held N4.19 trillion.

    DMO said it also expected the national debts to increase as it continues its domestic issuances. The agency noted that additional promissory notes might be issued in the next quarters while state governments’ borrowings may increase

    Many analysts have criticised the crowding effect of government’s domestic bond issuances but the DMO has repeatedly noted the developmental impact of government’s sovereign issues on the debt capital market, including breaking new markets in alternative debt and climate issuances.

    At the last count, Nigeria’s total outstanding non-sovereign bonds stood at about N1.03 trillion, including N630 billion in outstanding corporate debt issues and some N400 billion outstanding sub-national bonds.

    In terms of debt servicing, total payments in second quarter 2020 rose 42.6 per cent to N416.4 billion, driven by both domestic and external debt. Federal Government’s domestic debt servicing burden rose by 45.6 per cent to N312.8 billion from N214.8 billion in 2019. External debt servicing cost increased by 13.8 per cent to $287 million in second quarter 2020 from $252.3 million in second quarter 2019.

    “The increase in debt servicing burden suggests that Federal Government’s debt service to revenue ratio would continue to worsen, especially given weak revenue growth and further currency devaluation to N381.00 per dollar in third quarter 2020,” Afrinvest Securities stated at the weekend.

    In its report, analysts at Afrinvest Securities noted that the share of external debt in total debt for the Federal Government has now reached 38.9 per cent, nearing government’s target of 40.0 per cent.

    According to analysts, the rise of external debts to almost 40 per cent should ordinarily prevent the issuance of further external loans given the strong chance of further currency adjustments, but there may be sustained rise in government’s external debts due to additional budget support of $2.1 billion yet to be disbursed by World Bank, AfDB and the IDB.

    “Looking forward, we expect more domestic debt issuances to bring down the share of external debt and lower devaluation risk. On a brighter note, we believe the removal of energy subsidies-electricity and petrol, could herald a new fiscal era which would ease Federal Government’s expenditure burden, freeing up resources for investment in critical sectors,” Afrinvest Securities stated.

  • Banking stocks in selling spree as investors review outlook

    Banking stocks in selling spree as investors review outlook

    By Taofik Salako, Deputy Group Business Editor

    A considerable selloff in the banking sector moderated the performance of the Nigerian equities market; with average decline in the banking sector some 5,280 per cent more than average overall market decline and a double of the other nearer worse-performing sector.

    Nigerian equities market closed at the weekend with average decline of 0.05 per cent, equivalent to net capital depreciation of N7 billion. Average year-to-date return thus inched up to -4.66 per cent.

    Trading data at the Nigerian Stock Exchange (NSE) indicated that the large selloffs in major first tier banking stocks were the major cause of the decline in the overall market position, in spite of modest gain in the large-cap industrial goods sector.

    The NSE Banking Index- the value-based weighted index that tracks share prices in the banking sector, closed weekend with a five-day negative return of -2.69 per cent, more than double the second worse performance of -1.25 per cent posted by the NSE Oil and Gas Index. The NSE 30 Index- which tracks the 30 largest companies at the NSE closed with average return of -0.19 per cent. The NSE Insurance Index dropped by 0.66 per cent while the NSE Consumer Goods Index depreciated by 0.27 per cent. The NSE Industrial Goods Index- where Nigeria’s largest cement companies are listed, played the sole contrarian with average gain of 0.35 per cent for the week.

    There were considerable selloffs in many leading banks including Guaranty Trust Bank, Zenith Bank, United Bank for Africa and FBN Holdings.

    Trading in the shares of Custodian Investment, Zenith Bank and United Bank for Africa accounted for 404.171 million shares worth N3.847 billion in 3,910 deals, representing 32.97 per cent and 35.48 per cent of total equity turnover volume and value respectively.

    The Nation had reported last week that Nigerian banks’ margins were shrinking. Analysis of Nigeria’s seven largest banks, which account for more than 75 per cent of the banking industry, indicated that while top-line were steady and growing, the underlying profitability of the sector declined by almost two basis points in first half 2020.

    The seven first tier banks included Guaranty Trust Bank (GTB), Zenith Bank Plc, Stanbic IBTC Holdings, Access Bank, United Bank for Africa (UBA), FBN Holdings and Union Bank of Nigeria (UBN).

    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.

    Total turnover during the week stood at 1.23 billion shares worth N10.84 billion in 19,529, compared with a total of 2.21 billion shares valued at N10.96 billion traded in 18,013 deals two weeks ago.

    The banking-led financial services industry was the most active on the activity chart with 980.48 million shares valued at N6.99 billion in 11,634 deals; representing 79.99 per cent and 64.44 per cent of the total equity turnover volume and value respectively. The conglomerates industry occupied a distant second with 59.76 million shares worth N72.46 million in 550 deals while the consumer goods industry placed third with a turnover of 58.87 million shares worth N1.35 billion in 2,862 deals.

    Also, a total of 54,457 units of Exchange Traded Products (ETPs) valued at N283.940 million were traded in 18 deals compared with a total of 126,119 units valued at N655.92 million traded in 36 deals penultimate week.

    In the secondary debt market, a total of 7,125 units valued at N7.76 million were traded in 15 deals as against a total of 1,016 units valued at N1.1 million traded in eight deals two weeks ago.

    Aggregate market value of all quoted equities at the NSE dropped from its week’s opening value of N13.358 trillion to cose weekend at N13.351 trillion. The All Share Index also slipped from the week’s opening index of 25,605.64 points to close weekend at 25,591.95 points.

    There were 23 advancers and 38 decliners during the week compared with 41 advancers and 19 decliners recorded in the previous week. Eterna led the advancers, in percentage terms, with a gain of 28.85 per cent to close at N2.68 per share. C & I Leasing followed with a gain of 11.11 per cent to close at N4. NEM Insurance rose by 8.70 per cent to close at N2.25. NPF Microfinance Bank rallied 8.66 per cent to close at N1.38 while Academy Press chalked up 7.41 per cent to close at 29 kobo per share.

    On the negative side, Royal Exchange led with a drop of 15.15 per cent to close at 28 kobo. Consolidated Hallmark Insurance declined by 14.71 per cent to close at 29 kobo. Livestock Feeds dropped by 10.61 per cent to close at 59 kobo. Ardova depreciated by 9.92 per cent to close at N11.35 while Arbico dropped by 9.65 per cent to close at N1.03 per share.

    The performance at the Nigerian stock market mirrored the performance of the African markets during the week.  Egypt’s EGX 30 Index dropped by 1.0 per cent. Mauritius’ SEMDEX Index depreciated by 0.9 per cent while Ghana Stock Exchange Composite Index dropped by 0.7 per cent. However, South Africa’s FTSE/JSE All Share Index rose by 4.1 per cent while Kenya’s NSE 20 Index and Morocco’s Casablanca MASI Index appreciated by 1.1 per cent and 0.4 per cent.

  • UACN begins transfer of 51% UPDC stake to Custodian

    UACN begins transfer of 51% UPDC stake to Custodian

    By Taofik Salako, Deputy Group Business Editor

    UAC of Nigeria (UACN) Plc has started the divestment of its 51 per cent majority equity stake in UACN Property Development Company (UPDC) with the transfer of the first tranche of the shares to Custodian Investment Plc.

    The Nation had reported in August 2020 that Custodian Investment and UACN had signed a binding agreement on the divestment of UACN’s 51 per cent majority equity stake in UPDC to Custodian Investment. The transaction included sale of 9.47 billion ordinary shares of UPDC held by UACN, representing 51 per cent of UPDC’s issued share capital to Custodian.

    Under the agreement, the shares sale will be transferred in two tranches with initial sale of 946.56 million shares, representing 5.10 per cent of the issued share capital of UPDC, on execution of binding transaction agreements. Then, subsequent sale of 8.52 billion shares, representing 45.90 per cent of the issued share capital of UPDC upon receipt of requisite approvals.

    Regulatory documents at the weekend indicated that the transfer of the initial 946.56 million ordinary shares of 50 kobo each has been concluded at a price of 70 kobo per share. The cross deal for the transfer was struck on September 1, 2020 as an as an off- market deal through the negotiated trade window of the Nigerian Stock Exchange (NSE).

    The transfer placed the divestment on a fast-track and market analysts expected the divestment to be concluded within this year.

    Both parties to the transaction said the agreement marked the beginning of a partnership between Custodian and UACN that would achieve both companies’ respective objectives in the real estate industry. It was also described as a significant milestone that aligned with UACN’s strategy to focus on its core businesses.

    Group Managing Director, Custodian Investment, Wole Oshin said Custodian was excited about the possibilities arising from the partnership with UAC which provides multiple levers for value creation.

    He said the rationale for the transaction was that Custodian and UAC share the view that their ambitions for capturing opportunity in the real estate industry will be better achieved working in partnership.

    “UPDC is one of Nigeria’s leading real estate development companies, having completed several landmark residential and commercial developments over the past twenty years. This Transaction will provide Custodian with a platform to capture arising real estate opportunities. It also immediately provides recurring cash flow visibility and attractive yields as a result of its direct exposure to Nigeria’s leading real estate investment trust (UPDC REIT) with a track record of profitability and annual dividend distribution which offers a good compliment for our product portfolio,” Oshin said.

    He expressed confidence that the recent recapitalisation of UPDC, significant reduction in finance costs, and recently reconstituted leadership have repositioned the company to operate sustainably and capture growth opportunities aimed at increasing stakeholder value going forward.

    Group Managing Director, UAC of Nigeria (UACN) Plc, Folasope Aiyesimoju said the transaction was a significant step in achieving the group’s objectives for UPDC noting that in 2018, the board and management of UACN embarked on a strategic review to evaluate the performance of the company and its subsidiaries.

    According to him, UACN’s objective was to achieve sustainable positive financial performance from existing operations and enable management focus on businesses that align with its strategy. In reviewing UPDC, the board weighed the long-term opportunities in the Nigerian real estate sector against the fundamental differences between the cash flow profile and capital needs of UPDC and those of the other entities in UACN’s portfolio. Following its review, the board concluded that it would be in the best interest of UACN to exit its interest in the real estate sector, allowing UPDC to operate as a standalone legal entity, free to source appropriately structured capital and to unlock value for its shareholders.

    Last September, the directors of UACN and UPDC announced three significant strategic initiatives aimed at strengthening UPDC and positioning the company to operate as a standalone entity. These included a rights issue to recapitalise the business, plans for UACN to transfer UACN’s equity interest in UPDC pro-rata to UAC’s shareholders (UPDC unbundling), and plans for UPDC to unbundle the UPDC REIT to its shareholders (UPDC REIT unbundling). The N16 billion UPDC rights issue was completed in April 2020, proceeds of which were used to reduce borrowing costs and significantly improve UPDC’s capital position.

    “In the process of progressing the unbundling initiatives, UACN received a credible offer from Custodian. The terms of the offer compelled the board to re-evaluate the planned approach to deconsolidate UPDC and influenced the board’s decision to proceed with the sale of a portion of UACN’s interest in UPDC to Custodian, effectively putting an end to the UPDC unbundling. We are delighted about the positive impact that a strong anchor shareholder like Custodian will have on UPDC and are focused on ensuring a smooth transition,” Aiyesimoju said.

  • Naira in mixed performance

    Naira in mixed performance

    Our Reporter

    The naira depreciated at the parallel market but held on steadily at the official windows. Naira depreciated by N5 to close weekend at N445 per dollar at the parallel market.

    Naira, meanwhile, was steady at N386 per dollar at the official Investors and Exporters (I & E) window. The momentum of activities at the I & E window increased during the week, rising by 11.7 per cent to $240.8 million at the weekend compared with $215.6 million recorded in the previous week.

    Central Bank of Nigeria (CBN)’s spot rate also remained flat at N379.00 per dollar. Nigeria’s foreign exchange (forex) reserves rose by $76.42 million to $35.78 billion at the weekend.

    Trading reports indicated that total value of open contracts at the FMDQ Securities Exchange FX Futures Contract Market increased by 0.5 per cent or $62.9 million to $12.52 billion. The three-month forwards contract appreciated by 0.1 per cent at N388.30 per dollar while the six-month and one-year contracts appreciated by 0.2 per cent and 0.5 per cent to N391.02 per dollar and N400.38 per dollar respectively.

    Nigeria’s private sector think tank, Nigerian Economic Summit Group (NESG) last week criticised CBN’s foreign exchange management, decrying what it described as lack of clarity in the apex bank’s approach.

    “The group expresses serious concerns about how the CBN has carried on the business of foreign exchange transactions, loan disbursements (intervention funds) and price fixings without appropriate policy clarity. This can be subject to abuses, manipulations and significant market disruptions, reflective of a policy akin to crony capitalism. We therefore respectfully request the appropriate authorities to properly review this policy to restore credibility into our financial sector,” NESG stated.

  • Bankers’ committee embarks on cyber security/fraud awareness initiative

    Bankers’ committee embarks on cyber security/fraud awareness initiative

    Agency Reporter

    The Central Bank of Nigeria (CBN) and the Bankers’ Committee of Nigeria, on Monday, September 7th, 2020 launched its cybersecurity & fraud awareness campaign, called ‘Moni Sense’; to educate the general public on protecting themselves against cyber fraud and scams.

    Comprehensive fraud and cybersecurity awareness remain important in ensuring the general Nigerian public is informed on their role in protecting their banking information from fraudulent activities.

    Speaking on the initiative, Mr. Emeka Emuwa, Chairman, Financial Literacy and Public Enlightenment Sub-Committee (FLPE), said;

    “Fraudsters and scammers continually devise new ways to deceive the unsuspecting public, usually to lure them to inadvertently disclose confidential bank information. We encourage Nigerians to always be cautious and ignore any text message, phone call, or email asking to update your bank information, provide sensitive bank details, disclose online banking details, debit card numbers, bank verification number (BVN), or PIN to anyone.”

    READ ALSO: How to boost cyber security – experts

    Financial literacy and public enlightenment are a critical pillar of the Bankers’ Committee mandate, making initiatives like this critical to the goal of increasing the number of financially included citizens in the country. With this initiative, the Central Bank of Nigeria (CBN) and the Bankers’ Committee of Nigeria aims to ensure Nigerians are empowered with critical information and knowledge necessary to make important financial decisions, enhance economic prosperity, stay fraud aware and cyber safe, and drive poverty reduction across the country.

    In March 2020, the Central Bank of Nigeria (CBN) and the Bankers’ Committee introduced credit support schemes for households, MSMEs, and businesses across several sectors including Healthcare, Manufacturing, Agriculture, Trading, and Aviation. The Bank unveiled a succession of targeted facilities starting with a N50 billion credit facility to support households, and micro, small and medium enterprises (MSMEs), followed by another N100 billion credit support intervention for the health sector as part of efforts to combat the negative impact of coronavirus (COVID 19) on the Nigerian economy.

  • Nigerian stocks beat global slowdown with N154b gain

    Nigerian stocks beat global slowdown with N154b gain

    By Taofik Salako, Deputy Group Business Editor

    Nigerian stocks continued on the upswing as increased bargain-hunting sustained an all-week bullish trading that saw the stock market closing with average return of 1.17 per cent at the weekend, the second highest gain among global advanced and emerging markets. Kenya recorded average return of 3.4 per cent.

    Trading reports at the Nigerian Stock Exchange (NSE) weekend showed market-wide buying sentiments across major sectors as investors continued to react positively to mostly steady corporate earnings in the first half of 2020. The benchmark index for Nigerian equities, the All Share Index (ASI), closed weekend with average return of 1.17 per cent, equivalent to net capital gain of N154 billion.

    Nigerian, Kenyan and Japanese stocks were the major contrarian stocks in a week dominated by bearish sentiments across major global advanced and emerging markets. In United States of America, the S & P 500 dropped by 4.1 per cent while NASDAQ Index declined by 5.9 per cent. In United Kingdom, the FTSE ASI dropped by 2.7 per cent. Germany’s XETRA DAX Index dipped by 1.6 per cent. France’s CAC 40 Index slipped by 1.0 per cent. Hong Kong’s Hang Seng Index dropped by 2.9 per cent. Russia’s RTS Index declined by 3.8 per cent. China’s Shanghai Composite Index depreciated by 1.4 per cent.

    In Africa, South Africa’s FTSE/JSE ASI dropped by 4.1 per cent. Egypt’s EGX 30 Index declined by 2.5 per cent while Ghana’s GSE Composite Index slipped by 0.4 per cent. On the positive side, Kenya’s NSE 20 Index appreciated by 3.4 per cent while Japan’s Nikkei 225 Index gained 1.4 per cent.

    Aggregate market value of all quoted equities at the NSE rose from the week’s opening value of N13.204 trillion to close weekend at N13.358 trillion. The ASI also trended upward successively from its opening index of 25,309.37 points to close weekend at 25,605.64 points.

    The momentum of activities doubled with a total turnover of 2.21 billion shares worth N10.96 billion in 18,013 deals last week as against a total of 1.07 billion shares valued at N7.38 billion traded in 16,684 deals two weeks ago.

    The construction and real estate sector was the most active sector with a turnover of 954.53 million shares valued at N681.39 million in 218 deals; representing 43.21 per cent and 6.22 per cent of the total equity turnover volume and value. The financial services sector followed with 889.89million shares worth N6.54 billion in 10,107 deals while the conglomerates sector placed third with a turnover of 209.44 million shares worth N579.99 million in 677 deals.

    The three most active stocks were UACN Property Development Company, Zenith Bank and LASACO Assurance. The three most active stocks accounted for 1.23 billion shares worth N3.24 billion in 2,148 deals, representing 55.61 per cent and 29.60 per cent of the total equity turnover volume and value.

    Also, a total of 126,119 units of Exchange Traded Products valued at N655.919 million were traded this week in 36 deals, compared with a total of 107,424 units valued at N520.31 million traded in 18 deals penultimate week.

    In the bond market, a total of 1,016 units valued at N1.1 million were traded in eight deals compared with a total of 8,285 units valued at N10.66 million traded in 15 deals two weeks ago.

    The NSE All-Share Index and Market Capitalisation appreciated by 1.17 per cent to close the week at 25,605.64 and N13.358 trillion.

    With 41 advancers against 19 decliners, all sectoral indices closed positive. The NSE 30 Index, which tracks the 30 largest stocks, posted a gain of 1.31 per cent last week. The NSE Banking Index rose by 2.76 per cent. The NSE Insurance Index appreciated by 1.96 per cent. The NSE Consumer Goods Index rose by 1.49 per cent. The NSE Oil and Gas Index led the rally with average return of 3.65 per cent while the NSE Industrial Goods Index posted a modest gain of 0.44 per cent.

    Royal Exchange led the advancers with a gain of 26.9 per cent to close at 33 kobo. Cornerstone Insurance followed with a gain of 17.86 per cent to close at 66 kobo while Union Diagnostics rose by 12.5 per cent to close at 27 kobo. On the negative side, The Initiates led the decliners with a drop of 18.57 per cent to close at 57 kobo. Lasaco Assurance dropped by 16.13 per cent to close at 26 kobo while Tripple Gee & Company declined by 12 per cent to close at 44 kobo per share.

    Analysts at Afrinvest Securities attributed the sustained rally to positive developments in the Nigerian foreign exchange market, better-than-expected corporates earnings and improved economic activities.

     

    “While we expect the soft gains in the domestic market to be sustained, we note that investors are likely to pocket gains in the week ahead. Also, the resumption of foreign exchange sales could provide foreign investors the long-waited opportunity to sell their stakes and limit exposure. Thus, we anticipate a mixed performance in the coming week,” Afrinvest Securities traded.

    Analysts at Cordros Securities remained cautious citing combined risks of increasing number of COVID-19 cases in Nigeria and weak economic conditions. “Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks,” Cordros Securities stated.

     

     

  • AIICO Insurance floats N3.49 billion rights

    AIICO Insurance floats N3.49 billion rights

     

     

    AIICO Insurance Plc has opened application list for acceptance of new shares by existing shareholders as the insurance company seeks to raise N3.49 from its shareholders.

    AIICO Insurance is offering 4.36 billion ordinary shares of 50 kobo each at 80 kobo per share. The rights issue has been pre-allotted on the basis of five new ordinary shares of 50 kobo each for every 13 ordinary shares of 50 kobo each held by shareholders as at the close of business on June 15, 2020.

    Acceptance list for the N3.49 billion rights issue opened  last Wednesday and will run till October 7, 2020.

    The Board of Directors of AIICO Insurance had earlier recommended a scrip dividend that will see the insurance company distributing one ordinary share as bonus share for every five ordinary held by the shareholders as at Thursday, June 25.

    AIICO Insurance had earlier  consummated a capital injection that saw new strategic investors acquiring 38.83 per cent equity stake in the company. The acquisitions were done through a private placement.

    Read Also: ‘Why AIICO Insurance is divesting’

     

    AIICO Insurance offered 4.4 billion ordinary shares of 50 kobo each at N1.20 per share to raise N5.28 billion. The additional shares issued under the private placement increased AIICO Insurance’s issued share capital from 6.93 billion ordinary shares of 50 kobo each to 11.33 billion ordinary shares of 50 kobo each.

    Shareholders of AIICO Insurance had at the Annual General Meeting (AGM) in 2016 authorised the board of directors to raise new capital to bolster the operations of the insurance company. The new equity fund will boost the capital base of AIICO Insurance as the Nigerian insurance industry seeks to meet new minimum capital base for various insurance functions.

    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 the National Insurance Commission (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.

     

  • Rebound in manufacturing index continued in August

    The recovery in the  private sector gathered momentum in August as demand improved following the easing of restrictions related to the coronavirus disease 2019 (COVID-19), Nigeria Purchasing Managers’ Index (PMI), a property of Stanbic IBTC Bank PLC has shown.

    Output and new orders rebounded, rising sharply from July. Employment was stable, although excess capacity remained as a result of the severe declines in new business during the second quarter.

    Currency weakness led to another record increase in purchase costs, in turn feeding through to a rise in selling prices unprecedented since the survey began in January 2014.

    The  headline  figure  derived from the survey  is  the Nigeria Purchasing Managers’ Index (PMI), a property of Stanbic IBTC Bank PLC.

    Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

    The headline PMI rose sharply in August to 54.6, up from 50.4 in July. The reading signalled a marked improvement in business conditions, following a return to growth in the previous month.

    The rebound in new orders continued midway through the third quarter as client demand strengthened following the easing of COVID-19 restrictions. New business increased for the second month running, and to the greatest extent since January.

    A similar picture was evident with regards to business activity, which rose at a substantial pace that was much stronger than seen in the previous month.

    Despite strong rises in workloads during August, data suggested that the steep contractions seen during the second quarter left residual spare capacity.

    Companies were therefore able to continue depleting backlogs of work while leaving staffing levels broadly unchanged. The stability of employment did bring a four-month sequence of job cuts to an end, however.

    Spare capacity was also reported at suppliers. This, alongside relatively quiet road conditions, meant that vendors were able to speed up deliveries in spite of       a marked increase in purchasing activity. Stocks of purchases meanwhile rose sharply for the second month running.

    Overall input cost inflation quickened to a fresh series record in August, despite a reduction in  staff  costs.  The rise in overall input prices was driven by a record increase in purchase costs, in turn largely the result of currency weakness. In response to higher raw material prices, companies raised their own charges. As was the case with input costs, the increase in selling prices was the quickest since the survey began.

    Subdued business sentiment was registered  again  amid concerns around the lasting impact of COVID-19.

  • CBN commits N662b to banks’ liquidity control, stability

    CBN commits N662b to banks’ liquidity control, stability

    By Collins Nweze

     

    Commercial and merchant banks accessed N662 billion loans from the Central Bank of Nigeria (CBN) to control their liquidity and maintain stability, the the apex Economic has shown.

    The report also showed that the loans, which came through the Standing Lending Facilities (SLF), were meant to allow the lenders raise up their positions.

    Daily average was N41.40 billion while daily request ranged from N0.48 billion to N126.74 billion. Total interest earned was N0.37 billion.

    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 report said the total SLF granted, during the review period, was N662.44 billion (made up of N490.29 billion direct SLF and N172.15 billion Intraday Lending Facilities (ILF) converted to overnight repurchase agreement.

    According to the report, the trend at the CBN standing facilities window showed a decline at the SLF window, as against the increased patronage at the SDF window. Applicable rates for the SLF and SDF remained at 15.50 and 8.50 per cent.

    The total SDF granted during the review period was N443.63 billion with a daily average of N26.09 billion during the transaction days. Daily request ranged from N6.30 billion to N42.75 billion. Cost incurred on SDF stood at N0.16 billion.

    Further analysis of the report showed that total assets and liabilities of commercial banks amounted to N41,425.1 billion as at last October, showing 4.6 per cent increase, compared with the level at the end of the preceding month.

    Funds were sourced, mainly, from increase in unclassified liabilities, and the mobilisation of time, savings and foreign currency deposits. The funds were used, mainly, to acquire unclassified assets, foreign assets and to boost reserves.

    Read Also: World’s central banks launch green bonds fund

    Also, commercial banks’ credit to the domestic economy rose by 0.6 per cent to N22,261.0 billion by October, last year, compared with the level at the end of the preceding month. The development was attributed to the rise in its claims on the private sector.

    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. The decline, relative to the monthly budget estimate, was attributed to shortfall in both oil and non-oil revenue.

    Oil receipts, at N489.08 billion or 56.9 per cent of total revenue, was below both the monthly budget of N798.83 billion and the preceding month’s receipt of N577.30 by 38.8 per cent and 15.3 per cent.

    The decrease in oil revenue, relative to the monthly budget estimate, was attributed to shut-ins and shut-downs at some Nigeria National Petroleum Corporation (NNPC) terminals, due to pipeline leakages and maintenance.

  • SEC declares zero tolerance for market abuses

    SEC declares zero tolerance for market abuses

     

    The new Director- General, Securities and Exchange Commission (SEC), Dr Lamido Yuguda, at the weekend vowed to implement strict enforcement regime and a zero tolerance regime on infractions as the new management at Nigeria’s apex capital market regulatory body seeks to improve investors’ confidence and experience in the market.

    The Commission will also develop and implement  strategies to make transaction process at the market simpler and flexible without compromising the integrity of the process.

    Addressing his first media briefing after presiding over the first virtual meeting of the Capital Market Committee (CMC), Yuguda said the Commission would work with stakeholders to address the recurring problem of unclaimed dividend, assuring that the Commission will soon release a statement soon on unclaimed dividend.

    He said his administration would emplace zero tolerance for infractions as cornerstone of its investors’ protection, noting that increased investors’ confidence and experience will lead to greater inflow of domestic funds into the capital market.

    “We need to restore investor confidence and attract the retail and young investor into the market. Thus, we will ensure strict enforcement of our rules and regulations, strengthen our enforcement regime and clamp down on illegal operators luring unsuspecting investors with various Ponzi schemes,” Yuguda said.

    Read Also: COVID-19: Capital market in dire need of lifeline

     

    According to him, to increase the visibility and attractiveness of the capital market, the Commission shall work towards maintaining an environment that is enabled by the appropriate regulatory framework, timely and affordable access to the market, zero tolerance for infractions, heightened investor confidence and awareness, innovative product development and good governance practices.

    He assured that the new management will continue to implement the ongoing initiatives of the Nigerian Capital Market Master Plan and other related initiatives targeted at developing the capital market, noting that the new management will continuously seek ways of improving existing initiatives while introducing new ones, all to the benefit of market stakeholders.

    He said the Commission would also lead discussions on the most appropriate ways to increase pension funds’ investments in the  capital market.

    He commended the resilience of the market and operators, pointing out that the continuous operation of the capital market during this challenging period of COVID-19 pandemic was largely due to the existence of business continuity plans of SEC, the Exchanges, Central Securities Clearing System (CSCS) as well as other operators in the market.

    “One thing that was also emphasised at the meeting is the need for collaboration among market stakeholders to have a capital market of our dreams.

    ‘’The Commission is open to engagements with stakeholders that will foster new partnerships and strengthen our commitments towards the development and transformation of the capital market,” Yuguda said.

    He outlined that his administration would remove  complications and loopholes that tend to make the process of buying and selling as well as raising funds through the market cumbersome and sometimes frustrating.

    He said the Commission would work with the government to create an enabling environment that allows the capital market to play its roles as the fulcrum of economic development.