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Investors Swoop on FGN Bonds

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Investors

In the just concluded week, the OTC FGN bond market witnessed sustained bargain hunting as investors in the fixed income security pounced on instruments worth less than their prices.

This led to the appreciation in bond prices for all the maturities.

For instance, the 20-year, 10.00% FGN JUL 2030 bond appreciated by N0.61 (yield decreased to 15.23%);10-year, 16.39% FGN JAN 2022 paper gained N1.49 (yield fell to 14.81%); the 7 year,16.00% FGN JUN 2019 bond gained N1.15 (yield decrease to 14.93%); while the 5-year, 15.10% FGN APR 2017 paper rose by N0.42 (yield declined to 19.52%).

A report by Cowry Asset Management Limited showed that on the London Stock Exchange, traded FGN Eurobonds also appreciated on resumed bargain hunting activity as the 5-year, 5.13% JUL 12, 2018 bond and the 10-year, 6.38% JUL 12, 2023 bond lost $0.66 (yield fell to 4.26%) and $2.05 (yield fell to 6.40%) respectively.

This week, Debt Management Office will issue federal government bonds (all re- openings) worth N110 billion, viz: 5-year, 14.50% FGN JUL 2021 debt worth N40 billion; 10-year, 12.50% FGN JAN 2026 bond worth N30 billion; and 20-year, 12.40% FGN MAR 2036 paper worth N40 billion.

Analysts at the Cowry Asset Management anticipated that the stop rates would mirror last Primary market auction rates in line with CBN’s drive to keep rates high as incentive to attract Foreign Portfolio Investors.

Improved buying interest were also observed across the Sub-Saharan sovereign (SSA) Eurobonds as a result of appreciating commodity prices with year-to-date return at +7.2 per cent, buoying buy sentiments in emerging markets instruments.

Yields declined on all SSA sovereign bonds save for the South African 2017 which rose 0.5 per cent week-on-week.

Forex Market

The liquidity crunch in the foreign exchange market continued last week as the nation’s currency further depreciated week-on-week.

At the interbank, spot rate hovered between N312/$1 and N317/$1 from Monday to Thursday. The interbank spot rate closed at N332.07/$1 on Friday.

According to analysts at Afrinvest West Africa, compared to the preceding week, the naira/dollar exchange rate was less volatile at the parallel market, trading at N395/$1 all week save for Wednesday and Friday when it traded at N394/$1 and N397/$1 respectively.

Sentiments in the futures FX market also weakened last week as the one-year forward rate depreciated to N349.30/$1 from N345.42/$1 the preceding week.

“We believe the exchange rate will remain pressured in the interim until autonomous players return to the market to relieve the CBN of its role of major dollar supplies at the interbank. We are of the view that the depreciation of the naira, the reforms in the FX market coupled with current attractive yield environment should buoy foreign investor sentiment in Nigerian assets and aid the vital return of foreign capital to the market,” Afrinvest stated.

In view of the current macro-economic challenges in the country, the CBN last week announced that it has granted a one-off forbearance to banks this year to write-off their fully provided for non-performing loans (NPLs) without waiting for the mandatory one year.

The CBN stated that it acknowledged the request by banks to amend the requirements of S.3.21 (a) of the Prudential Guidelines, which mandates banks to retain in their records, fully provided NPLs for a period of one year before they are written off.

“The CBN has no intention of repealing the provision of the above mentioned section of the guidelines. In view of the current macro-economic challenges, however, the CBN hereby grant a one-off forbearance this year 2016 to banks, to write-off fully provided for NPLs without waiting for the mandatory one year,” it stated in circular addressed to all banks.

In a related development, in view of what it described as the observed abuse of access to its Standing Lending Facility (SLF) by banks and other authorised dealers, the CBN last week also announced measures to correct the anomaly.

To this end, it directed all authorised dealers to refrain from accessing the discount window on the settlement date for government securities’ auctions. The securities referred to are CBN bills, Nigerian Treasury Bills and Federal Government of Nigeria bonds. It stressed that any violation of the directive would result in the denial of access to the SLF.

Meanwhile, in a separate circular yesterday, which was in furtherance to its recent directive that banks that act as agents to approved international money transfer operators (IMTO) to sell foreign currency accruing from inward money remittances to licenced Bureau De Change (BDC) operators, the central bank yesterday fixed a maximum limit of $30,000 per week as what banks can sell to the BDCs. Also, in its bid to ensure that all Nigerian customers in the diaspora get their Bank Verification Numbers (BVN), the central bank in another circular, said it has re-opened the scheme. The enrolment for diaspora customers would now run from August 1st to December 31st, 2016.

Money Market

The money market opened last week opened with aggregate system liquidity in negative N75.1billion. Consequently, Open Buy Back (OBB) and overnight rates remained in double digits (18.3 per cent and 19.4 per cent respectively) last Monday as a result of liquidity dynamics. The OBB and overnight however surged to 22.5 per cent and 24.8 per cent on Friday, up three per cent and 4.2 per cent week-on-week as the CBN mopped up N256.4 billion in an OMO auction at marginal rate of 18 per cent. Activities in treasury bills market were mixed. Average rate inched 0.1 per cent, up on Friday to close the week at 17.1 per cent (down 0.3% week-on-week). The auction was five times oversubscribed with bids ranging from 17 per cent to 18 per cent. The stop rate at the auction was 18.0% and as a result all subscriptions were successful.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Portland Paints, Chemical and Allied Products Plc Agreed to Merge

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Portland Paints

Portland Paints, Chemical and Allied Products Plc Agreed to Merge

Portland Paints and Products Nigeria Plc and Chemical and Allied Products Plc have agreed to merge, according to the latest statement from both companies.

In a statement released through the Nigerian Stock Exchange, the Board of Directors of CAP said we are “pleased to inform you that following discussions and negotiations, the Boards of CAP and Portland Paints have reached an agreement to undertake a merger between both entities (the “Merger” or the “Proposed Merger”).

Accordingly, we “hereby present to you the terms and benefits of the Proposed Merger for your consideration and seek your support and approval to effect the Proposed Merger.

“The Proposed Merger presents a compelling opportunity to create significant value for shareholders of CAP and achieve the company’s strategic growth objectives as a larger company with a broader product portfolio, more corporate owned brands and diversified revenues.

“The resultant entity is also expected to benefit from enhanced distribution capabilities in addition to economies of scale and operational efficiencies.”

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Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17

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Shell

Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17

Tony Elumelu owned Heir Holdings Limited and its related company Transnational Corporation of Nigeria Plc on Friday announced it has completed the purchase of 45 percent stake in Oil Mining Lease (OML 17) through TNOG Oil and Gas Limited.

The acquisition includes all assets of Shell Petroleum Development Company of Nigeria Limited (30 Percent), Total E&P Nigeria Ltd (10 percent) and ENI (five percent) — in the lease.

It was further stated that TNOG Oil and Gas Limited will also have the sole right to operate OML 17.

The field presently has a production capacity of 27,000 barrels per day. Also, there are estimated 2P reserves (proven and probable) of 1.2 billion barrels and an additional one billion barrels in possible reserves — all of oil equivalent.

A consortium of global and regional banks and investors provided a financing component of $1.1 billion for the largest oil and gas financing in Africa in over a decade.

In a statement released on Friday, Shell said the completion was after all the necessary approvals have were received from authorities.

“A total of $453m was paid at completion with the balance to be paid over an agreed period. SPDC will retain its interest in the Port Harcourt Industrial and Residential Areas, which fall within the lease area,” the SPDC said.

Speaking after the completion of the deal, Elumelu said “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.

“As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.

“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”

Tony Elumelu is the Chairman of Heirs Holdings Limited, Transcorp and United Bank for Africa Plc.

Also, read Transcorp Plc Acquires FGN’s 100% Equity in Afam Power for N105 Billion

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Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods

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Institute of Chartered Shipbrokers

Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods

Exporters have said the recently introduced pre-export requirements by the Central Bank of Nigeria is creating unnecessary bottlenecks for exporters and the movement of goods out of the country.

Exporters, who spoke under the aegis of the Network of Practicing Non-oil Exporters of Nigeria (NPNEN), said the electronic Nigeria Export Proceed Form now required by financial institutions from exporters had come with so many challenges.

Ahmed Rabiu, the President, NPNEN, explained that the new policy had several requirements that often led to delays and loss of income on the part of exporters.

He said, “We acknowledge the CBN’s desire to ensure that all exports out of Nigeria are documented in order to ensure that the proceeds of such exports are repatriated.

“However, the reality on the field shows that the process is causing undue delays and consequently, encouraging corruption.

According to them, in the new pre-export requirements, the Central Bank of Nigeria wants an export transaction to be initiated through eNXP processing on the trade monitoring system.

After which exporters are expected to have a pre-shipment inspection agent, the Nigeria Customs Service and other designated government agencies carry out their pre-export inspections.

The exporters said the pre-shipment inspection agent was expected to issue a clean Certificate of Inspection while Customs would issue the Single Good Declaration. All these they said takes time and delay goods from leaving the country on time.

Pointing to a recent report, they said about N868 billion worth of goods bound for export were stuck at the ports due to the new policy.

Speaking further Rabiu said, “For example, for the PIA to issue the CCI, the exporter is required to upload a certificate of origin as one of the supporting documents for the eNXP.

“The PIA is also required to upload the CCI to the TRMS(M) and until this is done, the Customs service will not issue the Single Good Declaration.”

He added, “After issuing the SGD, the customs is further required to upload it into the TRMS before the goods are allowed to be gated into the port and loaded on the vessel by the shipping line.

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