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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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Company News

Lafarge Africa Board Proposes N30.60bn Dividend, Lower Than Previous Year

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Lafarge Africa - Investors King

Lafarge Africa’s Board of Directors has recommended a dividend payout of N30.60 billion for the year ended December 2023, a reduction from the previous year’s dividend.

The proposed dividend translates to N1.90 per unit of shares and awaits approval from shareholders at the upcoming Annual General Meeting (AGM) of the company.

In a corporate announcement filed with the Nigerian Exchange Limited, Lafarge Africa disclosed that the proposed dividend is payable from the Pioneer Reserve to shareholders registered as of March 28, 2024.

Despite the lower dividend proposal, Lafarge Africa recorded an increase in revenue to N405 billion, marking an 8.6% rise from the previous year’s N373 billion.

However, the company’s post-tax profit experienced a 4.7% decline, amounting to N51.14 billion, attributed mainly to the devaluation of the naira.

Lolu Alade-Akinyemi, the Chief Executive Officer of Lafarge Africa, expressed confidence in the company’s performance despite economic challenges.

He highlighted the growth in revenue and an improved operating margin, despite pressures from inflation and currency devaluation.

Looking forward, Lafarge Africa remains optimistic about the construction sector’s growth in Nigeria, despite prevailing economic challenges.

The company aims to leverage its market opportunities while maintaining a focus on sustainability and stakeholder value.

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Business

South African Billionaire Christo Wiese Predicts Return of Major Players to Nigeria Despite Recent Exodus

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Christo Wiese

South African billionaire Christo Wiese remains optimistic about Nigeria’s economic prospects, predicting the eventual return of major players despite a recent exodus from the West African nation.

In an interview with Bloomberg TV, Wiese explained that it is impossible to ignore Nigeria’s large and growing population, “how do you ignore an economy like this?”

Wiese, the former chairman of Shoprite Holdings Ltd., acknowledges the challenges faced by businesses in Nigeria, where recent currency woes and policy missteps have contributed to an exodus of international companies.

Procter & Gamble Co. and Shoprite are among the global conglomerates that have announced their departure from Africa’s most populous nation.

However, Wiese sees the recent exits as temporary setbacks rather than a long-term trend. He believes that the allure of Nigeria’s vast consumer market and its economic potential will eventually draw major players back.

Despite the current uncertainty, Wiese remains confident in Nigeria’s future, emphasizing the need for governments to adopt correct policies and for investors to exercise patience.

While acknowledging Nigeria’s single-commodity economy vulnerabilities, Wiese highlights the resilience of the nation’s economy and its potential for growth and development.

He suggests that foreign investors, including South African ones, are adopting a wait-and-see approach, anticipating a time when the economy stabilizes and favorable policies are in place.

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Appointments

Seplat Energy Names Udoma Udo Udoma as Independent Non-Executive Chairman, Bello Rabiu as Senior Independent Non-Executive Director

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Seplat Energy Plc - Investors King

Seplat Energy, a prominent Nigerian energy company listed on the Nigerian Exchange Limited and the London Stock Exchange, has made significant changes to its board leadership.

In a recent announcement, the company revealed that Udoma Udo Udoma has been appointed as the new Independent Non-Executive Chairman, succeeding Basil Omiyi, who is set to retire on March 31, 2024.

Udoma Udo Udoma, a distinguished lawyer and seasoned board administrator, brings a wealth of experience to Seplat Energy.

He holds degrees from St. Catherine’s College, Oxford, and has had a remarkable career spanning various sectors, including petroleum, energy, and natural resources.

Udoma has served on numerous large-sized company boards, including UAC Nigeria Plc and Union Bank Plc, and held key public sector appointments, such as Chairman of the Corporate Affairs Commission and Minister of Budget & National Planning.

In addition to Udoma’s appointment, Seplat Energy announced the selection of Bello Rabiu as the new Senior Independent Non-Executive Director, effective April 1, 2024.

Rabiu, a seasoned professional with extensive experience in the petroleum industry, holds multiple degrees and has served in various capacities at the Nigerian National Petroleum Corporation (NNPC).

The appointments come as part of Seplat Energy’s commitment to upholding strong corporate governance practices and ensuring a smooth transition of leadership.

Both Udoma Udo Udoma and Bello Rabiu are expected to play pivotal roles in guiding Seplat Energy as it continues to expand its operations and consolidate its position as a leading energy company in Nigeria and beyond.

In a statement, Basil Omiyi, the outgoing Chairman of Seplat Energy, expressed confidence in the newly appointed leaders, emphasizing their capabilities to steer the company towards further growth and success.

The appointments underscore Seplat Energy’s dedication to fostering excellence and innovation in the energy sector while meeting the evolving needs of its stakeholders and contributing to Nigeria’s energy transition efforts.

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