EnuguSME, Author at Enugu SME Centre

Stock: Equity Market Rallies N109bn Rally

The Nigerian Stock Exchange (NSE) Thursday sustained the bullish trend as trading rallied to a N109 billion gain

The All-Share Index and Market Capitalization rose by 0.53 percent to close at 39,293.14 basis point and N20. 558 trillion, up from 39,085.78 basis point and N20. 449 trillion respectively.

The ASI and market capitalisation appreciated by 207.36 index point and N109 billion respectively.

The market turnover decreased by 36.6 percent, as investors bought and sold 229.417 million shares worth N3.780 billion in 4,016 deals as against the 361.903 million shares valued at N5.701 billion in 4,018 deals that exchanged hands on Wednesday.

The market breadth was positive with 23 stocks appreciating, while 12 declined.

The top gainers was led in percentage parameters by Coronation Insurance Plc, rising by 10 percent to close transaction at N0. 55 Kobo per share.

UPDC Real Estate Investment Plc appreciated by 9.80 percent to close at N5. 6 Kobo per share, while Pharma – Deko Plc climbed by 9.63 percent to close at N1. 48 Kobo per share.

Neimeth Pharmaceutical and GlaxoSmithKline surged by 9.55 and 9.45 per cent to close at N1. 95 Kobo and N6.95 per share respectively.

Conversely, Sovereign Trust Insurance led the losers’ chart, losing 8.33 percent to close at N0. 22 Kobo per share.

PF Micro Finance Bank shed 7.22 percent to close at N1.8 Kobo per share, while Prestige Assurance Plc declined by 6.82 percent to close at N0. 41 Kobo per share.

Japaul Gold and Dangote Sugar Refinery Plc fell by 4.44 and 2.67 percent to close at N0. 43 Kobo and N16. 4 Kobo per share respectively.

For the second consecutive trading sessions, Union Bank of Nigeria was the most active stock at 79. 566 million shares valued at N421.699 million.

While Communication giant, MTN Nigeria finished trading as the most valuable equity at N1.613 billion.

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Liquidity rises, external reserves grow but naira falls

Nigeria’s currency, Naira, on Thursday weakened against the dollar despite increased liquidity and growing external reserves.

After trading on Thursday, the foreign exchange market closed with Naira losing 0.24 percent to the dollar at N409.75k compared to N408.75k closed on Wednesday at the Investors and Exporters (I&E) forex window, data from the FMDQ indicated.

The Naira depreciation was attributed to strong demand for dollars by the end users to meet their import obligations.

Currency traders who participated in the trading on Thursday maintained bids at between N393.00k and N411.40k/$.

The daily foreign exchange market turnover rose significantly by 394.36 percent to $171.84 million on Thursday from $34.76 million recorded on Wednesday.

Nigeria’s external reserves grew by 0.61 percent to $34.62 billion as at March 24, 2021 from $34.41 billion as of March 18, 2021 according to data obtained from the Central Bank of Nigeria (CBN)’s website.

At the end of the Monetary Policy Committee (MPC) meeting on Tuesday, Godwin Emefiele, governor of the CBN noted the committee’s satisfaction over the improvement in the level of external reserves, which he said stood at US$36.46 billion at end-February 2021, compared with US$34.94 billion at end-January 2021.

This, he said reflects the recent upsurge in crude oil prices on the backdrop of the renewed optimism on the successful deployment of COVID-19 vaccines across the globe.

At the black market and Bureau De Change (BDC) segment of the foreign exchange market, Naira remained unchanged on Thursday at N485 and N486 per dollar, respectively.

The Nigerian Treasury Bills secondary market closed on a negative note on Thursday with average yield across the curve increasing by 14 bps to close at 4.04 percent from 3.90 percent on the previous day, according to a report by FSDH research.

Average yield across the medium-term maturities expanded by 47 bps. However, the average yields across short-term and long-term maturities closed flat at 2.06 percent and 5.32 percent, respectively.

Yields on 6 bills advanced with the 16-Sep-21 maturity bill recording the highest yield increase of 75 bps, while yields on 14 bills remained unchanged.

The Overnight (O/N) rate increased by 1.75 percent to close at 15.75 percent on Thursday as against the last close of 14.00 percent on Wednesday, and the Open Buy Back (OBB) rate increased by 2.00 percent to close at 15.50 percent from 13.50 percent on the previous day.

Agricultural Development Fund Coming.

Nigerian farmers may soon have multiple access to funds for cultivation and other activities as a new National Agricultural Development Fund is coming.

The new Fund, when it is established will draw funding from Nigeria’s annual budget from which it is expected to support the country’s agricultural sector.

The bill to establish the fund was passed by Senate on Wednesday following the consideration of the report of the Senate Committee on Agriculture and Rural Development.

When the bill is assented by President Muhammadu Buhari, the federal government will be compelled to allocate 10 percent of its national budget to agrucultura development in line with the MAPUTO declaration of 2003.

Presenting the report, Chairman of the Committee, Senator Abdullahi Adamu (APC, Nasarawa West) explained that the purpose for the establishment of the Fund is to provide finance to support the strategic aspect of Agricultural Development in Nigeria.

He observed that to date, Nigeria is yet to fully implement the 2003 MAPUTO Declaration on Agriculture requiring States Parties to allocate 10 percent of its National budget to Agricultural Development.

“If this was done, Agricultural Research and Development, Food Production and Food Security would have witnessed a major leap”, Adamu said.

The Fund is to provide emergency support funding for Agricultural control access to finance trans-boundary animal disease outbreak; as well as support service through micro finance and collaborate with development partners to support food security and Agricultural modernization.

It addresses key binding constraints to complete transition from subsistence farming to modern Agriculture capable of generating inclusive growth and economic diversification.

There are several intervention programmes for agriculture sector especially in the banking industry administered by the Central Bank of Nigeria and it is expected that the new Agric development fund when it is eventually established will be complimentary.

Dangote Cement Enters Trillion Earners’ Club With 15.9% Revenue Growth.

Dangote Cement Group has grown its revenue by 15.9 percent in 2020, crossing over to the trillion league with its earnings that surged to N1.034 trillion in 2020 from N891.671 billion in 2019.

The cement company in its 2020 financials show that its Gross profit rose to N596.226 billion up from N511.682 billion, representing a 16.5 percent growth.

Administrative expense climbed to N60. 339 billion from N54.124 billion, while Production cost of sales stands at N437,970 billion up from N379.989 billion. Also Selling and distribution expenses is at N153.719 billion.

The Profit from operating activities fell from N386. 734 billion to N276.068 billion for the year after an Income tax Expense of N97.24 billion was deducted.

Dangote Cement’s profit after tax (PAT) of N276.068 billion soared from N200.521 billion it posted in 2019, which indicated a 37.7 percent appreciation, profit before tax rose by 49 percent, leaping from N250.479 billion the previous year to N373. 310 billion in the year in review.

According to the 2020 statements, the company’s Total Assets are put at N2.022 trillion, jumping from N1.742 trillion, a 16.1 percent growth. However, its Equity fell by 0.77 percent to stand at N890. 970 billion down from N897.937 billion.

Its Liabilities outstripped Assets by rising by 33.9 percent to stand at N1.131 trillion from N844.500 billion in the corresponding year.

According to the Financials, Property, plant and equipment stand at N1.390 trillion, while its share capital remains at N8.520 billion same as 2019.

Also, the company’s earnings per share, basic and diluted moved to N16.14 Kobo up from N11. 79 Kobo it posted in the previous year. It generated N720 billion of the revenue from its operations in Nigeria, while about N320 billion from the offshore operation.

The report also revealed that sales volume from its products rose by 8.9 per cent, while its net cash flow of N511.89 billion from its operating activities soared from N426.12 billion in 2019.

Dangote Cement also proposed a dividend payout of N16 per share, this is while disclosing a tax charge of N97 billion for the financial year ended 31st December 2020. A tax charge represents an increase of N50 billion recorded in 2019.
Dangote Cement’s Nigerian operations during the period sold 15.9Mt for the full year 2020, compared to 14.1Mt in 2019. This includes both cement and clinker sales. Looking at the domestic sales alone, Nigerian operations sold 15.6Mt. Revenues for the Nigerian operations came in at N720.0 billion, owing to demand in the domestic market.

This volume growth was enhanced by a successful innovative national consumer promotion “Bag of Goodies – Season 2” and lower rains in the third quarter compared to the previous year.

Dangote Cement posted a record high Pan-African EBITDA of N71.3 billion. Within the period under review, the cement group commissioned its gas power plant in Tanzania. Group earnings per share were N16.14.

Registration for FG’s MSME survival fund to open Monday

The federal government has announced that registration for the N75 billion survival fund for micro, small and medium enterprises (MSMEs) will begin on Monday, September 21.

Mariam Katagum, minister of state for industry, trade and investment, said the programme is aimed at tackling the economic challenges faced by small businesses as a result of the coronavirus outbreak.

Katagum was speaking at the virtual commissioning of the fashion cluster shared facility for MSMEs tagged ‘Eko Fashion Hub’ in Lagos on Friday.

Katagum explained that the programme, which would run for an initial duration of three months, would be opened for 1 .7 million entities and individuals across the country.

“The federal government is fully committed to empowering Nigerians; more so in the face of the COVID-19 pandemic,” she said.

“In this regard, the government, through the economic sustainability committee had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

“These programmes include among others, the N75 billion MSME survival fund and Guaranteed Off-take schemes of which I have the honour to chair the steering committee for the effective implementation of the projects.

“The project, which will run for an initial period of three months, is targeting 1.7 million entities and individuals and has provisions for 45 percent female-owned businesses and five per cent for those with special needs.”

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CardinalStone’s West Africa SME Fund Closes at $64M

Lagos-based private equity fund manager CardinalStone Capital Advisers (CCA) has announced the final close of its maiden private equity fund, the CardinalStone Capital Advisers Growth Fund LP (CCAGF ) at US$64 million.

The CCAGF is a generalist fund that makes equity investments of $5 million–$10 million in high-growth SMEs operating across a range of sectors including industrials, agribusiness, consumer goods and services, education, healthcare, and financial services.

CCAGF investors, which are a mix of commercial and development finance institutions include Kuramo Capital, the UK Government’s CDC Group, FMO – the Dutch Entrepreneurial Development Bank, the International Finance Corporation (IFC, part of the World Bank Group), the Nigerian Sovereign Investment Authority (NSIA) and a number of high-net-worth individuals.

The Fund, which recorded its first close in December 2018 and final close in September 2020, was established to support the growth and institutionalisation of small and medium-sized enterprises (SMEs) operating in two of West Africa’s leading economies – Nigeria and Ghana.

Private equity companies raise and manage funds that are invested in different sectors. The first step in raising funding is announcing and marketing the funding to potential investors. The initial closing refers to the period within which the first set of investors commit to putting money in the fund while the final close refers to when the last set of investors have committed to investing in the fund.

The CardinalStone Fund has invested in two businesses, iFitness Center Limited and AppZone Group Limited, and plans to invest in another 6-7 companies over the next 2 years.

iFitness, a Nigeria-based fitness chain, operates with a mission of improving the overall health and well-being of the average Nigerian by providing high-quality, yet affordable fitness offerings. Meanwhile, the fintech solutions provider, AppZone, provides a bouquet of financial services offerings.

CBN holds benchmark interest rate at 11.5%

The Central Bank of Nigeria (CBN) on Tuesday retained its benchmark interest rate, known as the Monetary Policy Rate (MPR), at 11.5 percent after the two-day Monetary Policy Committee (MPC) meeting in Abuja, citing inflation concerns.

This comes not as a surprise as analysts in the financial services sector had expected a hold following persistent uptick in inflation rate and weak growth.

Nigeria’s inflation rose to 17.33 percent in February 2021 from 16.47 percent in January 2021, according to data from the National Bureau of Statistics (NBS).

In the fourth quarter of 2020, Nigeria’s economy sluggishly recovered from a recession it slipped into in the second quarter (Q2) of 2020 – after output contracted for two consecutive quarters.

Real GDP grew by 0.11 percent in the fourth quarter of 2020, from -3.62 percent in Q3 2020, according to NBS data.

The CBN also retained the Cash Reserve Ratio (CRR) at 27.5 percent, Liquidity Ratio at 30 percent as well as the Asymmetric Corridor around the MPR at +100/-700 basis points.

Given the fact that the rise in inflation has been due to cost-push factors rather than demand pull factors, Godwin Emefiele, governor of the CBN, said the Monetary Policy Committee has placed greater weight on utilising tools that would strengthen the nation’s productive base as a nation.

Taiwo Oyedele, head of Tax and Corporate Advisory Services at PwC, had said the rising inflation would be of concern to the MPC as it does not support any expansionary policy changes. He said a contractionary policy adjustment would hurt the fragile economic growth and recovery.

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How to invest when inflation bites

Inflation is the general rise in the prices of goods and services over time. The “inflation rate” is the rate at which the change in prices happens; this is usually expressed in percentages over time.

Alice Abegunde, a mother of three teenagers, does not understand the reason behind the constant increase in the price of rice, her children’s favourite food.

“Every time I go to the market, they have added to the price of rice,” Abegunde, 44, a resident of Lagos State, says.

While Abegunde might not be able to connect the dot and blame the rice sellers for the rise in price, Emeka Johnson could, he knew times were going to be hard as inflations numbers kept rising and resolved to save more and spend less.

What Johnson does not know is that he is constantly losing money because the value of his money drops as inflation rises.

What is inflation?

It is the general rise in the prices of goods and services over time. The “inflation rate” is the rate at which the change in prices happens; this is usually expressed in percentages over time. For instance, if inflation goes up 10 percent than last year, it means purchases will cost 10 percent more than they did last year.

Basically, inflation reduces the value or usefulness of money; the higher inflation rises, the less your money is worth, in real terms as time goes by. Therefore, it is about your purchasing power, that is, how much your money can buy.

What causes inflation?

There are reasons why prices rise. First, when everyone suddenly develops a taste for beef, the price of beef will rise. This follows a basic law in economics that, higher demand for a product will push up its price. This is also called demand-pull inflation.

What this means is that when the demand for goods and services in the economy exceeds the economy’s ability to produce them, their short supply places upward pressure on prices and gives rise to inflation.

Another reason prices rise is that the cost of producing goods and services increases. Companies would usually respond to higher cost of production by increasing the price they sell their products; they do this to cover the extra cost they incurred while producing. This is known as cost-push inflation.

How is inflation measured in Nigeria?

Every month we hear news about new inflation rate or data but have you ever wondered how it is calculated? Nigeria uses a well-known indicator called the Consumer Price Index (CPI), which measures the average change over time in prices of goods and services consumed by people every day.

In Nigeria, the CPI is calculated by the National Bureau of Statistics (NBS) and published every month. To calculate CPI, the NBS gets people to collect prices for thousands of items that an average Nigerian consumer buys such as food, prescription drugs, rent, petrol and many others. These items are grouped into categories called baskets. Every month, the NBS calculates the price changes of each item from the previous month and aggregates them to work out the rate for the CPI basket.

Who controls inflation?

Afreximbank, NEXIM sign $50m deal to boost Nigeria’s trade sector

African Export-Import Bank (Afreximbank) and the Nigeria Export-Import Bank (NEXIM) have signed a Memorandum of Understanding (MoU) to establish a Joint Project Preparation Fund. This will provide early project preparation financing and technical support services to public and private sector organisations operating in Nigeria’s trade sector.

Signed on 20 February 2021, the MoU provides that Afreximbank and NEXIM will collaborate through the Joint Project Preparation Fund to unlock investments into sectors such as export manufacturing, agro-processing, solid minerals development and beneficiation services, as well as healthcare, Information, and Communications Technology, and creative industries.

The Joint Project Preparation Fund will support public and private sector investors by providing technical and financial support services that will result in a steady pipeline of well-structured, bankable projects that Afreximbank, NEXIM, and other financial institutions can readily fund.

The Fund will assist the early development process of projects from concept stage to bankability by covering the preparation of feasibility studies, project development and advisory services and related costs.

Afreximbank and NEXIM aim to mobilise up to US$50 million in the form of project preparation funds for investments in Nigeria.

Benedict Oramah, President of Afreximbank, said, “The execution of this Memorandum of Understanding marks yet another significant milestone in our collaboration with NEXIM. I am particularly pleased that Afreximbank and NEXIM are boldly venturing upstream to help investors develop well-structured projects that meet market standards.”

This intervention is timely and the Fund will play a catalytic role in accelerating the diversification of the Nigerian economy by ensuring a steady flow of bankable projects in priority tradable sectors in a timely manner.

In addition to enhancing bankability, the Fund will, on a case-by-case basis, undertake feasibility studies to assess the viability of accessing markets in the sub-region, thereby promoting intra-African trade under the AfCFTA.

This replicates a similar initiative that Afreximbank pioneered in Malawi in partnership with Malawi Export Development Fund (EDF).

Abubakar Abba Bello, managing director of NEXIM, said his bank was pleased about the partnership opportunity with Afreximbank.

This will resolve the challenges associated with the shortage of credit in Nigeria’s trade sector.

Bankly gets $2m seed funding to financially include 2m Nigerians

In the next three years, over 2 million Nigerians are likely to gain access to financial services thanks to a $2 million seed funding raised by Bankly on Wednesday.

Founded in 2018 by Tomilola Adejana and Fredrick Adams, Bankly is looking to put a bank in the pocket of Nigeria’s 36m unbanked adults. Bankly’s primary strategy is to deploy money agents across the country. Haven started with about 2000 agents, Blankly plans to expand to a 15,000 agent network with its new funding.

The latest seed fundraising led by Vault and Flutterwave with participation from Plug and Play Ventures, Rising Tide Africa and Chrysalis Capital.

“We’re thrilled to have closed this milestone fundraise and to have such seasoned fintech investors who understand the market join us on this journey to bank Nigeria’s unbanked. Our goal has always been to reach the last mile using a fast-moving consumer strategy.

Now we have built the agent network and are poised to serve customers directly via offline and online channels. Partnerships, collaboration, and a deep understanding of the needs of the unbanked will be vital to our success,” said Tomilola Adejana, CEO and Co-founder of Bankly.

Bankly plans to increase its 35,000 customer base in cash dependent communities.

To achieve this, the company plans to grow the number of its physical “cash in” points by expanding its 15,000 person agent network and plugging its API into partner networks. Bankly will also develop direct-to-consumer (DTC) products for its customer base that will be available through its app and USSD channels.

Over the next three years, Bankly aims to grow its customer base to 2 million unbanked Nigerians, supporting the aims of the Central Bank of Nigeria’s National Financial Inclusion Strategy.

“Given our over 20 years experience in Nigeria’s fintech industry and previous exits, we strongly believe that Bankly understands the nuanced needs of this market – not to mention the team, strategy, and technology — to succeed in bringing affordable financial services to the unbanked.

We are delighted to participate in this financing round as Bankly moves into its next growth stage,” said Idris Alubankudi Saliu, Partner, Vault.

Bankly allows ajo participants to save their money using both online and offline methods.

Customers can deposit and withdraw cash with a Bankly agent or make payments using its app or USSD function.

Enugu SME Centre

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