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Investors Swoop on FGN Bonds

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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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South African Government to Sell Stake in South African Airways to Takatso Consortium

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South African Airways - Investors King

The South African government is selling a 51% stake in South African Airways (SAA) to Takatso consortium, which will initially commit more than 3 billion rand ($221 million) to give the struggling airline a new lease of life.

SAA has been under a form of bankruptcy protection since December 2019, but its fortunes worsened during the COVID-19 pandemic and all its operations were mothballed in September 2020 when funds ran low.

The airline is one of a handful of South African state companies that depend on government bailouts, placing the national budget under huge strain at a time of rapidly rising debt.

The partnership with Takatso will alleviate that financial burden, public enterprises minister Pravin Gordhan told journalists on Friday as the state would no longer provide any funding to the airline, which exited administration in late April after receiving 7.8 billion rand from the government. read more

Gordhan added that the government will retain a 49% stake with the intention of eventually listing the airline to address future funding requirements.

“The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial and operational expertise to ensure a sustainable, agile and viable South African airline,” he said.

The consortium includes pan-African investor group Harith Global Partners and aviation group Global Aviation, Gordhan said.

Following the announcement, co-founder and consortium Chair Tshepo Mahloele told Reuters that 3 billion rand should be sufficient to operate the airline for 12 to 36 months.

The government could dispose of more of its ownership stake going forward, he added.

“They aren’t married to this 49%,” he said. “They won’t be putting more money into this asset.”

An initial public offering for the airline is unlikely to happen within the next three years, and SAA would first need to become profitable, Takatso Chief Executive Gidon Novick said.

Novick said Takatso would seek to relaunch SAA as soon as possible, prioritising first domestic service followed by regional destinations.

International long-haul routes would follow but would be selected carefully, and SAA would also work to forge partnerships with major carriers.

“We’re going to be competing with the greatest airlines in the world, and we need to be mindful of that,” Novick said.

The airline’s subsidiaries meanwhile will be evaluated, in particular Air Chefs, SAA Technical and low-cost airline Mango, Gordhan said, noting that “anything can happen” when asked if some could be shut down.

SAA will continue to be domiciled in South Africa and the government will have a “golden share” of 33% of the entity’s voting rights and certain areas of national interest, Gordhan said.

($1 = 13.5379 rand)

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Coca-Cola Partners NGOs To Clear Plastic Waste In Nigeria

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Coca-Cola Company - Investors King

Coca-Cola Nigeria has said it partnered with non-profit organisations to reduce plastic pollution across the country.

In a statement on Thursday, it said it would be doing more to promote environmental sustainability as part of efforts to commemorate World Environment Day.

It stated that it had introduced initiatives to protect the environment through its philanthropic arm, the Coca-Cola Foundation.

Coca-Cola said that it supported the Statewide Waste and Environmental Education Foundation to launch the Eko Beach Race 2021 themed ‘A race against plastic pollution.’

The event had in attendance 2,000 youths, students and sports enthusiasts who participated in a marathon race and beach clean-up.

SWEEP Foundation’s President, Obuesi Philips, stated at the event that it “was geared towards recognising the growing contributions of sport to the realisation of societal development.”

The drink maker also partnered with the Aid for Rural Education Access Initiative to host the “Recycle and Win” festival.

It included community outreach and clean-up programmes in Kwara, Kano, Kaduna, Yobe and Oyo States. Coca-Cola said that 10 tons of plastic bottles were recovered through the process.

The Director, Public Affairs, Communications and Sustainability at Coca-Cola, Nwamaka Onyemelukwe, urged Nigerians to adopt more eco-friendly practices while emphasising the urgency of the current global situation.

Onyemelukwe stated, “At Coca-Cola, we recognise there is a packaging waste problem globally and especially in Nigeria, which is why we pioneered the World Without Waste initiative to engineer innovative solutions to tackle this challenge.

“World Environment Day presents an opportunity for us to act on this mandate as seen by the number of environmental sustainability initiatives we have supported in collaboration with local implementing partners.”

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RAK Unity Petroleum to Shutdown as Shareholders Approved Liquidation

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Rak Unity Petroleum company - Investors King

Shareholders of RAK Unity Petroleum Company Plc, at the company’s 18th Annual General Meeting, held on Friday, 4th June 2021, agreed that the company be wound up voluntarily in accordance with the provisions of the Companies and Allied Matters Act 2020.

The company disclosed in a statement signed by Olubukola Olonade-Agaga, ALSEC nominees Limited Company Secretary.

The liquidation is subject to the approval of the members of the Company in the general meeting.

The statement in part, “THAT Mrs Chinwe Chiwete of the law firm of EPIC Legal of Block 74, Plot 22B, Emma Abimbola Cole, Lekki Phase 1, Lagos be appointed liquidator for the purposes of winding up of the Company, subject to the approval of the members of the Company in the general meeting.

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