Dollar Bill

What to expect of CBN “naira for dollar” scheme

by with No Comment financeNews

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.

READ ALSO: High demand for OMO bills as yields top 10%

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.

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OMO BILLS

High demand for OMO bills as yields top 10%

by with No Comment finance

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.

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

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.

READ ALSO: Farmers benefit from CBN AB program

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

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Stock Exchange

Stocks shed N245bn: Investors go for attractive yields

by with No Comment Businessfinance

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.

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

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.

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SEC, AFDB

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

by with No Comment BusinessfinanceNews

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.

READ ALSO: CBN extends interest rate cut on pandemic loans

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.

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CBN

CBN extends interest rate cut on pandemic loans

by with No Comment financeNews

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.

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

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.

READ ALSO: Farmers benefit from CBN Anchor Borrower program

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.

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European Fund

European Fund okays $16b for Nigeria, others

by with No Comment finance

The European Development Fund (EDF), the main instrument for EU aid for development cooperation with the African, Caribbean, and Pacific countries (ACP),  has so far  supported Nigeria and other countries  with £4,732,573,734  about $6,622,148,448.77.

READ ALSO: Nigerian stock market extends loss by 0.40%

Project budget is £4,789,417,222. It started  December 13 , 2010. It will end on December 31 Dec 2027.

EDF provides support to African, Caribbean and Pacific (ACP) countries and Overseas Countries and Territories (OCTs) to eradicate poverty, support sustainable development and integrate ACP countries into the world economy. The funding is implemented by European Investment Bank, European Commission  and Directorate-General for International Cooperation and Development.

Information from  the United  Kingdom (UK) – Foreign, Commonwealth and Development Office (FCDO) indicated that the  project was approved before the referendum on the UK’s membership of the EU. Under the terms of the Withdrawal Agreement with the EU, the UK will honour its commitment to the current and previous European Development Funds.

In 2015, the EU, signed a  regional funding for cooperation with representatives of regional organisations from West Africa, covering the time until 2020. The Regional Indicative Programme under the 11th European Development Fund amounted to a total of €1.15 billion. The West Africa Regional Indicative Programme was co-signed by the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA).16 Countries benefited from the EU-West Africa Regional Indicative programme.

These included  Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. Under the  10th EDF Regional Indicative Programme (2008-2013) for West Africa.The   was  budget €595 million.

The 10th EDF Regional Indicative Programme (2008-2013) for West Africa had a budget of €595 million. The EU is currently implementing its 11th European Development Fund for the period 2014-2020, with an aid budget of €30.5 billion for many of the ACP countries and Overseas Countries and Territories (OCTs), covering both national and regional programmes.

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Stock Market

Nigerian stock market extends loss by 0.40%

by with No Comment BusinessfinanceNews

Nigerian stock market extended negative trend for the third consecutive trading session following sell pressure on Nigerian Breweries, Dangote Sugar Refinery and tier-1 banks.

READ ALSO: Small businesses get N53b to create 1 million jobs

The All-Share Index on Thursday declined further by 157.39 points or 0.40 per cent to close at 39,394.67 from 39,522.06 posted on Wednesday.

Accordingly, the month-to-date and year-to-date losses increased to 1.1 per cent and 2.3 per cent, respectively.

In the same vein, the market capitalisation shed N83 billion to close at N20.595 trillion against N20.678 trillion recorded on Wednesday.

The market loss was driven by price depreciation in large and medium capitalised stocks amongst which are; Presco, Nigerian Enamelware, Nigerian Breweries, Julius Berger and Ardova.

Consequently, market sentiment was negative with 47 losers in contrast with 13 gainers.

Fidson Healthcare led the losers’ chart in percentage terms with 10 per cent to close at N4.41 per share.

Northern Nigeria Flour Mills followed with a decline of 9.97 per cent to close at N6.32 per share.

NEM Insurance and Nigerian Enamelware shed 9.95 per cent each to close at N1.72 and N19.90 per share, respectively.

NCR declined by 9.91 per cent to close at N3.09 per share.

Conversely, University Press dominated the gainers’ chart in percentage terms with 9.91 per cent to close at N1.22 per share.

Morison Industries followed with 9.09 per cent to close at 60k, while Chemical & Allied Products increased by 5.26 per cent to close at N20 per share.

Lafarge Africa grew by 3.59 per cent to close at N20.20, while livestock Feeds rose by 3.17 per cent to N2.28 per share.

Transactions in the shares of Universal Insurance topped the activity chart with 83.26 million shares valued at N16.65 million.

Zenith Bank followed with 38.65 million shares worth N983.25 million, while FBN Holdings traded 31.25 million shares valued at N216.72 million.

United Bank for Africa accounted for 26.78 million shares valued at N211.57 million while Access Bank transacted 21.59 million shares worth N168.09 million

Meanwhile, the total volume of traded increased by 101.8 per cent as investors bought and sold 493.17 million valued at N4.72 billion exchanged in 5,486 deals.

This was against a total of 244.34 million shares worth N4.13 billion traded in 4,714 deals on Wednesday. (NAN)

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Small businesses

Small businesses get N53b to create 1 million jobs

by with No Comment Businessfinance

The Bank of Industry yesterday disclosed that it had  disbursed N53 billion to Micro, Small and Medium Enterprises (MSME), thereby creating jobs for about one million Nigerians.

READ ALSO: Price of petrol could rise as uncertainty looms in the global market

BOI’s Executive Director, Micro-Enterprise Directorate, Mrs. Toyin Adeniji, made this known during the graduation of the first batch of the participants of the Post-COVID-19 Economic Strategy Pilot Training Programme at the   Local Government Service Commission office, in Abere, Osogbo.

Adeniji said: “We have disbursed over N53 Billion to MSMEs in different sectors, thereby facilitating the creation of an estimated one million direct and indirect jobs.

“BOI provides subsidised loans to MSMEs at a single digit all-inclusive interest rate, which has helped to stimulate economic activities in the MSME sector.

Osun State Governor Adegboyega Oyetola said his administration had adopted a proactive strategy to stimulate the economy of the state which hitherto was adversely affected by COVID-19.

He also presented cash seed loans to 2,000 successful trainees of the Skills Upgrade and Entrepreneurship Training Programme.

Oyetola added that his administration had put in place, a workable strategy and   measures by making skill upgrade training, a priority in its 2020 budget as part of efforts to cushion the effects of the  global economic downturn and prepare for the worst circumstances that might arise.

The governor noted that the programme was designed to generate 15,000 direct and indirect sustainable job opportunities for the people annually.

He said his  administration had set aside ¦ 100 million for disbursement to beneficiaries of the scheme as seed loans of ¦ 100,000 only to each participant.

His words: “As an institution charged with providing security and welfare for citizens, our government, on coming to office two years ago during the world economic downturn adopted a proactive strategy to prepare for the situation and the worst circumstances that might arise.

“Under the Skills Upgrade training programme, we were able to re-focus, re-engineer and expand the scope, knowledge and relevance of artisans and people who lost their jobs to make them relevant under the new normal orchestrated by Covid-19.”

The Commissioner for Commerce, Industries, Cooperatives and Empowerment, Bode Olaonipekun, said the programme was put together by the government as part of efforts to address the adverse effects of the COVID-19 pandemic and ameliorate the disruptions to the livelihood of citizens.

He said 2, 000 participants were all trained in 15 different types of skills and empowered with startup loans to support their businesses.

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CBN

CBN extends forbearance for intervention loans by another 12 months

by with No Comment financeNews

The Central Bank of Nigeria (CBN) has announced an extension of its regulatory forbearance for the restructuring of its intervention facilities by another 12 months.

READ ALSO: Nigeria’s equities market loses over N200bn in 4 days

In a circular signed by Dr. Kevin Amugo, the Director of Financial Policy and Regulatory. the apex bank said it will continue to charge its borrowers an interest rate of 5% per annum as against the 9% originally offered.

The CBN had on March 20th reduced the interest rates on its intervention loans from 9% to 5% as part of its response to the economic crunch brought on by Covid-19 induced lockdowns.

The banking sector regulator also offered to rollover moratorium granted on all principal payments on a case by case basis. All credit facilities had been granted a one-year moratorium starting from march 1, 2020 when the pandemic first gripped Nigeria.

Below is excerpt from the circular:

“The Central Bank of Nigeria reduced the interest rates on the CBN intervention facilities from 9% to 5% per annum for one-year effective March 1, 2020, as part of measures to mitigate the negative impact of COVID-19 Pandemic on the Nigerian economy.”

Credit facilities, availed through participating banks and OFIs, were also granted a one-year moratorium on all principal payments with effect from March 1, 2020.

Following the expiration of the above timelines, the CBN hereby approves as follows:
1) The extension by another twelve (12) months to February 28, 2022 of the discounted interest rate for the CBN intervention facilities;

2) The roll-over of the moratorium on the above facilities shall be considered on a case by case basis.

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Equity Market

Nigeria’s equities market loses over N200bn in 4 days

by with No Comment financeNews

Listed stocks on the Nigerian equities market have lost approximately N228billion within just four (4) trading days into this new month as sell-side activities increase.

READ ALSO: Key to SME growth in Lagos State

The market furthered into the negative region after Thursday’s dip by 0.41percent. Month-to-date (MtD), it has decreased by 1.09percent while year-to-date (ytd), it is down by 2.25 percent.

As the bears gradually regain position on Custom Street, the stock market of Africa’s largest economy is not far from closing the first week of March in red. The market is worse off as investible funds continue to move out of equities due to impressive yields in the fixed income market.

“Nigerian equities have since maintained a southward direction, losing 5.6percent in February 2021… The question on many investors’ minds is largely to know if this is a temporary lull, a correction, or a significant crash”, according to United Capital research analysts.

READ ALSO: SME Sensitization Tour’ at Osisatech Enugu

The analysts had reiterated that the sustained reversal in the yield environment weakens investors’ interest in equities.

“We view the current bearish performance in the market as a correction that is likely to extend through the period when yields in the fixed income market stabilize. We recognize this as an opportunity for investors to take advantage of lower prices to buy into stocks forecasted to deliver solid earnings in 2021, employing a patient approach in building up positions”, United Capital research said in a recent note.

The NSE All-Share Index (ASI) and Market Capitalisation which opened this week at 39,799.89 points and N20.823trillion respectively stood lower at 39,364.67 points and N20.595trillion at the close of trading session on Thursday. In 5,486 deals, investors exchanged 493,172,597 units valued at N4.722billion.

Fidson Healthcare led the laggards after its share price moved down from N4.9 to N4.41, losing 49kobo or 10percent. Northern Nigeria Flour Mills followed, after its share price decreased from N7.02 to N6.32, losing 70kobo or 9.97percent, while Nigerian Enamelware lost N2.2, from N22.1 to N19.9, down by 9.95percent.

NEM Insurance share price decreased from N1.91 to N1.72, losing 19kobo or 9.95percent, while NCR lost 34kobo or 9.91percent, after moving from N3.43 to N3.09.

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