EnuguSME, Author at Enugu SME Centre

What to expect of CBN “naira for dollar” scheme

What to expect as CBN’s naira for dollar scheme begins
Starting today, March 8, Nigerians who use formal channels to receive dollars from abroad will get 5 naira extra for every $1 they remit through licensed international money transfer operators and commercial banks.

The program will initially run for 60 days, according to the CBN, which is betting on the move to improve dollar liquidity in the official window.
Based on the policy, Deposit Money Banks reached out to their customers on Sunday telling them that N5 would be given for every dollar received by the customers.

Nigeria is turning its attention to diaspora remittances as it seeks to boost dollar inflows into the country after a difficult past year that saw dollar flows dry up on the back of lower oil exports, causing shortages of the greenback.

In December 2020, the CBN also unveiled new rules on remittances allowing people getting cash from friends or family abroad to be paid in US dollars. This marked a divergence from the usual practice of paying in naira which discouraged diaspora inflows via official channels.
Economists say the latest incentive by the CBN to boost diaspora inflows could indeed help direct some dollars through the official channel and ease the pressure on the naira which last traded at N411 per dollar at the investors and exporters window.
The big question on the minds of analysts is the cost implication of the scheme.

New week, old worries for equities
Bearish sentiments again dominated the Nigerian equities market last week, dragging the All Share Index to its fifth consecutive negative close.
The NSEASI shed 1.18% WoW to 39,331.61pts, while the year-to-date return sunk deeper into negative territory, settling at -2.33%.
All sectoral indices closed negative with the exception of the Insurance index which climbed 1.39 percent. MORISON (+20.00%) topped the gainers’ chart, while CHAMPION shed -33.33% to emerge as the week’s biggest loser.
As yields in the fixed income market continue to rise, the equities market is expected to continue to see outflows.
It remains to be seen however if the ongoing corporate earnings season can swing sentiments in favour of embattled stocks.

Mixed corporate earnings
A number of audited financial results were released last week, with mixed performance across board. While Dangote Sugar recorded strong top and bottom-line growth (+33.03% and +33.16% respectively), Ardova Plc managed to grow its revenues (+2.90%), although after-tax profit dipped by 47.30% compared to last year. SEPLAT, on the other hand, recorded declines in both top and bottom-line.
MTN Nigeria also released its 2020 audited financial statements that showed an 8.5 percent increase in operating profits to N426.73 billion, as data revenues surged by 51 percent to N332.37 billion.
This week will see more corporate results and there are expectations that the financial performance of companies in 2020 will reflect the impact of the pandemic on the economy which slipped into a second recession in five years last year.

High demand for OMO bills as yields top 10%

Demand for OMO bills remains high in Nigeria with investors offering to buy more than five times the amount of securities sold at Thursday’s auction.

In that auction, investors offered to buy 5.2 times the amount of securities sold, with yields of 10.1%.

Treasury bills with similar maturities offer about half those returns as the country’s central bank hopes to use the short-term bills to lure portfolio investors and shore up the naira after the crash in crude prices led to a dollar shortage.

The central bank has also denied that it plans to freeze foreigners out of this lucrative short-term bills market.

“There is no plan by the CBN to stop OMO sales to foreigners,” central bank spokesman Osita Nwanisobi told Bloomberg Thursday, referring to Open Market Operations bills.

Governor Godwin Emefiele also said in an interview with a Lagos-based newspaper that the central bank isn’t thinking about excluding offshore investors from the short-term bond market.

The bank had outstanding OMOs of $8.3 billion as of March 4 from $31.9 billion as at the end of 2019, according to data compiled by Bloomberg.

This was after barring domestic funds from buying the securities and reducing new issuances as the cost of offering the instruments spiked.

In the foreign exchange market, the CBN intervened through its periodic supply of UD dollars last week offering a total of $100.00 million via the Secondary Market Intervention Sales (SMIS) Wholesale Window on March 2, 2021.

In the Investors’ & Exporters’ (I&E) FX Window, the total value of trades for the week-ended February 26, 2021, stood at $476.33 million, representing an increase of 101.48% ($239.91 million) from the $236.42 million reported for the week-ended February 19, 2021, and bringing the total value of trades at the Window year-to-date, to $2,543.04 million

In the FX Futures market, $138.91 million worth of FX Futures contracts were traded in thirteen (13) deals during the same period, compared to the total of $235.30 million traded in twenty (20) deals recorded in the week-ended February 26, 2021

Okonjo Iweala’s WTO win is inspirational, but ….

Before Okonjo Iweala, No woman has ever been elected governor in Nigeria since independence in 1960, whereas in the United States, 43 women have served or are serving as the governor of a US state and three women have served or are serving as the governor of an unincorporated US territory, underscoring Nigeria’s poor record at gender equality.

Although Ngozi Okonjo-Iweala’s win as the first woman and African director-general of the World Trade Organisation (WTO) serves as an inspiration for women, it does not translate to Nigeria making much progress on gender equality.

According to the United Nations Children’s Fund (UNICEF), gender equality means that women and men, and girls and boys, enjoy the same rights, resources, opportunities, and protections.

“While we draw up lessons and inspiration from her, I doubt that it would suddenly change our gender ranking globally because she is just one person,” said Motunrayo Alaka, ‎executive director at Wole Soyinka Centre for Investigative Journalism.

Alaka said that the country is doing very poorly in terms of intention to change the status quo.

According to data from a 2020 Global Gender Gap Index by the World Economic Forum (WEF), Nigeria ranked 128th out of 153 countries.

The report which measures the progress made towards gender parity also showed that out of the four indicators – economic, education, health, and political empowerment – used to benchmark the ranking, Nigeria improved in economic empowerment index, while the rest regressed.

Fabia Ogunmekan, executive secretary, Women in Successful Careers (WISCAR), said that Okonjo-Iweala’s win would inspire more women to succeed.

“I believe that we will see the ripple effect of what she has achieved in the near future, as institutions will leverage her story as a case study for how women in the workplace can achieve career longevity and success in their chosen fields of endeavour,” Ogunmekan said.

Globally, women and girls represent half of the world’s population and, therefore, also half of its potential. And it is believed that women now play a very vital role in human progress and have a significant place in society.

However, gender equality in Nigeria is constrained by cultural practices which elevate patriarchy to an absurd degree.

This is why a gender equality bill, designed to eradicate gender inequality in politics, education, and employment, has been marooned in the national assembly for close to 10 years.

“Okonjo-Iweala’s win is supposed to improve our march to gender equality but in a society like ours, it is not certain,” said Tinu Mabadeje, a nonviolence training consultant. “We just hope that this will convince our leaders that women can do as well as men if given the right opportunities.”

Prior to independence, and even before the advent of colonial rule, the role of a woman in society had significantly changed as Nigeria had an admirable array of women who had done great, inspiring deeds and even conquered territories.

Glaring examples were Margaret Ekpo, a women’s rights activist and a social mobiliser who was a pioneering female politician in the country’s First Republic and a leading member of a class of traditional Nigerian women activists, many of whom rallied women beyond notions of ethnic solidarity.

There was Funmilayo Ransome-Kuti, a teacher, political campaigner, women’s rights activist, traditional aristocrat, and the first woman to drive a car. Her political activism led to her being described as the doyen of female rights in Nigeria. She was also regarded as ‘The mother of Africa’.

In recent times, the example of Oby Ezekwesili, who served first as minister of solid minerals and later as minister of education under the Obasanjo presidency, is instructive. Ezekwesili also served as the vice-president of the World Bank’s Africa division from May 2007-May 2012 and was a 2018 nominee for the Nobel Peace Prize.

Nonos Catering empowers women in business

Nonos Catering Service, a fast growing catering company in Lagos, is set to empower women in catering and events business via a one-day summit with successful female professionals in the Industry.

Organised by Nonos Catering Mentoring Initiative (NCMI), the summit tagged ‘Spend the Day with Successful Business Women in Catering and Events,’ holding on March 10, 2021 at the Civic Centre, Victoria Island, Lagos, and would have notable successful women in the industry interact and teach the upcoming ones on how to build their businesses to become profit making ventures.

According to the managing director of NCMI, Abumere Uto’ the idea is for successful women who have reputable profit making businesses in catering and events to share their growth story to; inspire, motivate, empower and encourage the women who register to be NCMI mentees.

“By becoming a mentee, we hope that their businesses will gain more visibility, increase profit, employ better marketing strategies as well as reduce loss and wastage,” she said.

Buttressing on the vision which she birthed three years ago, Abumere pointed out that being a trainer and mentor to many women, she realised that there was a strong need to bridge the gap by bringing women at the business start-up stage to meet with established and successful women in the same line of business together.

She said: “I saw the eagerness to learn and hear the success stories of these women who inspired them on a daily basis.

“So on the 9th of March, 2018, I launched the NCMI by inviting 20 women that engage in the business of catering and events to understudy me for a day. The idea of the ‘meet and greet’ was to share my start up story, weaknesses and strengths, success stories and failures in the hope of; inspiring, correcting, motivating and empowering.

“It is my vision that the mentees of NCMI become women who network, collaborate, share business opportunities and increase the quality of their service and productivity. I want them to be women who will also increase their visibility through adverts and social media activities to create more business profitability and sales.

“Most importantly, I would want them to become mentees who will make better business decisions, reduce their cost prices and risks which in turn will guarantee the growth of their business from the time they joined NCMI.

“Through these benefits they are empowered to excel in their businesses as catering and events professionals in the Industry.”

Commenting on meeting the goals of the annual Summit, Uto who holds a Master Degree in Globalisation and Development from the University of Manchester, United kingdom, said her organising team observed the growth and keen interest of participants and decided to host a larger group as it received over 180 applications for the last mentoring initiative held on the 5th of September 2019.

M36 redefines digital investment in Nigeria

M36, a new digital platform designed to deliver a wide range of investment products directly to individuals, has launched in Nigeria.

Through an innovative, user-friendly app, M36 offers investment options not typically available on self-service digital platforms including foreign currency transactions, commercial papers, local and foreign denominated bonds, treasury bills and other fixed income products.

It also offers bespoke solutions for both new and experienced investors as well as a 24-hour lifestyle concierge service to meet the needs of discerning customers.

In a rapidly evolving environment with changing consumer behavior fuelled by technology and growing access to information, M36 is looking to expand opportunities for investors at all levels, while also simplifying the process of investing.

It was developed by Union Bank as part of its strategic focus on delivering superior customer solutions leveraging technology and innovation. The bank partnered several asset management companies to deliver the broad range of investment products on the M36 platform.

Chuka Emerole, head, treasury at Union Bank, said “M36 eliminates the traditional barriers to investing and offers investors direct access to financial instruments that would usually require the service of an investment or relationship manager. We have designed M36 to ensure simplicity in the on-boarding and investing process while also empowering the customer to make sound investment choices based on their financial objectives. We worked with key partners to deliver both the experience and products on M36 and are confident that we have launched a superior product in today’s marketplace.”

Stocks shed N245bn: Investors go for attractive yields

Investors in Nigeria’s equities market became worse off in the trading week ended March 5 after booking about N245billion loss as funds moved out of equities due to impressive yields in the fixed income (FI) market.

Investors are now battling with the decision to either buy into the recent dip or to stay out of the market pending when there are major positives capable of reversing the negative trend.

The market disappointed despite significant increase in prices of crude oil –Nigeria’s major source of dollar revenue, coupled with the attractive dividend yields of a number of dividend-paying counters.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) and Market Capitalisation moved from week-open highs of 39,799.89 points and N20.823 trillion respectively to close the review week at 39,331.61 points and N20.578trillion.

The NSE ASI closed negative in four out of the five-day trading week, causing the benchmark performance indicator of the Bourse to decrease by 1.18percent week-on-week (WoW).

This negative was fueled mostly by remarkable losses in consumer goods, insurance and oil & gas stocks as evidenced in their sectoral indices.

NSE-30 Index which tracks the top 30 companies in terms of market capitalisation and liquidity decreased by 1.46percent in the review trading week.

Except NSE Industrial index which rose by 1.39percent, other sectoral indices closed in red –NSE Consumer goods index (-6.30percent), NSE Insurance index (-4.99percent), NSE Oil & Gas (-2.16percent), NSE Pension (-2.83percent), and NSE Banking (-1.94percent).

The stock market of Africa’s largest economy had bullish run in 2020 with a record-breaking return of +50percent amid unattractive yields in the fixed income space, placing it as world’s best.

Likewise, the market kicked off 2021 with similar trend, gaining 5.3percent in January, but since February (-5.6percent) it has maintained a southward direction. As at close of trading on Friday, the market has lost 2.33percent of its year-open value.

AfDB provides $400,000 grant for Nigeria’s SEC

The African Development Bank Group has signed a $400,000 grant agreement with the Securities and Exchange Commission of Nigeria to strengthen securities markets regulation and broaden market instruments.

The funds will go towards strengthening risk-based supervision framework, regulation of derivatives and green bonds, and build capacity for green finance. The grant will be sourced from the Capital Markets Development Trust Fund, a multi-donor fund administered by the Bank. AFDB

“This collaboration further underscores our mutual goal to grow our markets and create viable avenues for sustainable economic development for Nigeria and the region,” said Lamido Yuguda, Director General of the Securities and Exchange Commission at the virtual signing ceremony.

The grant is aligned with the priorities of the Bank’s Country Strategy for Nigeria, which envisages measures to stimulate capital market development to unlock financial resources for productive sector investments, infrastructure development and private sector growth.

The project will reinforce the implementation of SEC’s Nigeria Capital Market Master Plan 2015-2025 and its vision to position the Nigerian capital market as a competitive and attractive destination for portfolio investments.

Lamin Barrow, Senior Director of the Bank’s Nigeria Country Department, (AFDB) noted the urgency for speedy implementation of activities contemplated in this project.

“At a time when countries are striving to build back better from the ravages of the COVID-19 pandemic, improvement of the enabling regulatory and supervision framework will boost domestic resource mobilisation efforts and leverage private sector contributions to achieve a greener, more environmentally sustainable and inclusive post-pandemic recovery” Barrow added.

CBN extends interest rate cut on pandemic loans

The Central Bank of Nigeria’s (CBN) extension of the interest rate it reduced during the pandemic (officially known as discounted interest rate) by another 12 months is seen as a big boost for an economy licking its wounds from the recession, most analysts polled by BusinesDay said.

Discounted interest rate is a rate charged by the monetary authority, in this case, the CBN on the deposit money banks.

On March 1, 2020, the CBN reduced the interest rates on its intervention funds from 9 percent to 5 percent per annum for a one-year period.

The reduction was part of measures to mitigate the negative impact of the COVID-19 pandemic on the Nigerian economy. One major impact of the intervention was in the management of Non-Performing Loan (NPL) in the banking system.

Although the banking sector NPLs rose to 6.01 percent at the end of December 2020 from 5.88 percent at the end of November 2020 and above the prudential maximum threshold of 5.0 percent, analysts said it would have been worse than this if not for the discounted facilities and moratorium for banks and other financial institutions.

Akintunde Olusegun, analyst at Polaris Bank Limited, said extending the discounted rate was good for the economy as the COVID-19 pandemic was still on. Most businesses affected have not recovered, and ending it now would not have helped those businesses.

He said the CBN acted in the right direction, noting, “It gives the companies the opportunity to rebound. The impact of the previous discounted rate could be seen on the GDP, which came against the predictions of most economists and the IMF. Surprisingly, Nigeria exited recession.”

The extension followed the positive impact recorded in the first discounted intervention facility in 2020. Borrowers of the facility were majorly the manufacturers and agribusiness operators.

Data from FBNQuest showed that the Manufacturing Purchasing Managers Index (PMI) made a good recovery from 44.5 to 53.0 in February 2021. The good recovery was driven by medium-sized and small firms.

According to Ayodeji Ebo, head, retail investment, Chapel Hill Denham, it is a positive development. It will help the banks in managing NPL. If it is positive, it gives them leeway. The discounted rate for the CBN intervention facility last year provided support to most companies, especially, in the real sector. It helped in the increase in crop production and reduction in cost of fund.

The National Bureau of Statistics (NBS) report showed that agriculture contributed 24.23 percent to nominal GDP in the fourth quarter of 2020, higher than the rates recorded for the fourth quarter of 2019, but lower than the third quarter of 2020, which recorded 23.38 percent and 28.41 percent, respectively. The annual contribution of agriculture to the nominal GDP in 2020 was 24.45%. Crop production sector grew by 3.68% in Q4 2020 from 1.38% in Q3 2020 and 2.52% in Q4 2019.

What Nigeria must do for more diaspora investment

More than two years after Somadina Iruegbu, a Nigerian UK-based businessman in diaspora, acquired a large plot of land in one of the most sort-after axis of Lekki, Lagos State, intending to develop it for commercial purposes, he has been unsuccessful in getting a land title.

Even after asking his lawyer to take over the land registration from his brother who was stuck in the process, a year into it, Iruegbu said he was tired of the different payments his lawyer was requesting to ‘settle’ some officials at the land registration office, to help fasten the process.

“I am regretting the investment, if I had invested that money in the UK or even any other country, it would have at least yielded some kind of return by now,” Iruegbu lamented in a WhatsApp call with BusinessDay.

Like Iruegbu, a lot of diaspora Nigerians have had a fair share of the harsh business environment. Possibly, Iruegbu’s experience might even discourage others.

The bottlenecks associated with getting a land title is not peculiar to Nigerians in the diaspora or those with plans to develop lands for commercial use, it also affect a lot of the country’s residents who either do not know people in high offices or lack the funds to ‘settle’ their way out of the normal but long registration process.

Data by PwC show that about 97 percent of lands in Lagos are unregistered. This, according to analysts, makes it difficult for banks to validate claims to land or for land occupants to use their land to create wealth or to start a business.

While Nigerian’s in diaspora moved 15 places to 131 in World Bank Doing Business ranking for 2020, it ranked 149 on the ease of obtaining Construction Permit and requires 17 procedures, 118 days, and 27.5 percent of property value, a factor PwC says would encourage more informal construction of properties and increase risks in the real estate sector.

“Whatever has been done has still not solved the problem of titling, forget the e-certificate. The people that will provide the e-certificate can be bottlenecks in the process,” Jide Ogunleye, CEO of Denaro Properties Limited, says, adding that officials won’t move land document file except they are paid.

The bureaucratic corruption, bribery, embezzlement and extortion in the different levels of government is not peculiar to the land titling office, it is the same for many government establishments.

Brent moves towards $70 as Goldman Sachs raises Q2’21 forecast to $75

Brent, the benchmark for Nigeria’s crude oil, is moving towards $70 a barrel, less than 24 hours after the Organisation of Petroleum Exporting Countries (OPEC) and allies agreed to keep production levels unchanged.

On Friday morning, international benchmark Brent crude rose 5.4 percent to $67.85 a barrel as at 8.am Nigerian time, while US West Texas Intermediate (WTI) crude futures stood at $64.85, around 1.60 percent higher after OPEC’s meeting late Thursday.

Reacting to Thursday’s meeting, Goldman Sachs is now even more bullish on oil, expecting Brent crude prices to hit $75 a barrel in the second quarter of 2021, on the back of faster market rebalancing, lower expected inventories, and traders hedging against inflation.

In a note on Friday, cited by S&P Platts, the investment bank’s analysts forecast Brent crude prices reaching the $75 a barrel mark during the second quarter of this year, thus lifting its previous Q2 and Q3 forecasts by $10 per barrel.

“Faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,” said Goldman Sachs.

For Africa’s biggest oil producer, a signal of higher oil price is always a blessing in terms of improved earnings. However, it might end up becoming a problem for the nation’s downstream sector, which still allows the price of petrol to be remotely controlled.

If oil exceeds the $70 mark, Nigerians would have to prepare for higher pump prices of PMS of at least N200 a litre in the coming weeks, without subsidy from the Nigeria National Petroleum Corporation (NNPC).

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