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External Reserves Shed $1bn in Five Weeks

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one year

The country’s external reserves have been depleted by $1bn in the last five weeks, latest statistics from the Central Bank of Nigeria have showed.

This follows the CBN’s almost daily intervention at the interbank/official foreign exchange market in recent weeks, as chronic dollar shortage continues to weigh on the economy.

In its efforts to defend the naira and prevent it from falling further at the official interbank market, the central bank has been selling dollars at the interbank market more frequently.

The naira had fallen to an all-time low of 365.25 to the dollar at the interbank market on August 18 before making a gradual recovery. On Friday, the local currency closed at 310.64 against the greenback.

At the parallel market, the naira, which has been under persistent pressure, closed at 424 to the dollar on Friday.

The external reserves fell by 2.86 per cent to $25.45bn on August 29, 2016, up from the $26.2bn it recorded at the end of July.

Year-on-year, the reserves have fallen by 18.9 per cent.

The reserves had fallen by 0.4 per cent at the end of July, down from the $26.34bn recorded on June 29.

The foreign exchange reserves stood at $26.42bn on May 28, down by 9.2 per cent year-on-year.

The CBN had on June 20 lifted its 16-month-old currency controls and auctioned about $4bn on the spot and futures market to clear a backlog of dollar demand, to help boost interbank market trading.

The global plunge in oil prices has caused the reserves to be depleting very fast. The development had forced the CBN to introduce foreign exchange controls, which were abandoned in June.

The CBN’s Monetary Policy Committee announced plans to adopt a flexible exchange rate policy after the external reserves fell to $26.56bn on May 23.

The external reserves have so far lost over $2bn this year.

The nation recorded a balance of payments deficit of 1.4 per cent in its Gross Domestic Product at the end of 2015 owing largely to its first current account deficit (three per cent of the GDP) in over a decade.

The nation’s external reserves reduced by $6.7bn within a period of 21 months, the Minister of Budget and National Planning, Senator Udo Udoma, said on March 23.

However, the foreign exchange reserves increased by $595m to hit a one-month high of $26.196bn, the CBN data showed on Monday.

It had stood at $25.6bn as of August 24, down from $26.21bn on July 28, the CBN data showed.

The reserves declined from $26bn on August 4, 2016 to $25.97bn on August 5 as the CBN stepped up dollar sales to boost liquidity at the interbank market and support the ailing naira.

The central bank has been selling dollars regularly at the interbank market to prop up the naira since it floated it on June 20.

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.

Finance

Ecobank Profit After Tax Declined by 298 Percent in Q3, 2020

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Ecobank

Ecobank, whose official name is Ecobank Transnational Inc., reported a 298 percent declined in profit after tax for the third quarter ended September 30, 2020.

In the unaudited financial statements released through the Nigerian Stock Exchange, the leading lender’s profit after tax declined from N19.347 billion profit posted in the same quarter of 2019 to -N38.250 billion in the third quarter of 2020. Representing a decline of 298 percent.

Similarly, profit before tax dipped by 182 percent from N36.052 billion filed in the corresponding quarter to -N38.250 billion in the quarter under the review.

However, net interest income rose by 45 percent from N64.563 billion in 2019 to N93.621 billion in 2020. But the 163 percent plunged in other operating income from N77.939 billion in the third quarter of 2019 to -N4.505 billion in the quarter under review weighed on non-interest revenue by 1 percent to N77.229 billion.

Similarly, operating expenses rose by 12 percent to N106.321 billion, up from N94.526 billion. Net monetary loss arising from hyperinflationary economy rose from zero in the third quarter of 2019 to N8.817 billion in Q3 2020 with Goodwill impairment hitting N60.584 billion from zero in the corresponding quarter of 2019.

This, coupled with N8.762 billion tax dragged profit before tax to -N29.635 billion in the third quarter.

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Finance

First Bank, GTBank, UBA, Others Generate N133.92 Billion from Electronic Payment in Nine Months

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Rising investment in financial technologies and the growing adoption of electronic payments have earned 12 Nigerian banks a total sum of N133.92 billion in the first nine months of the year.

Billions spent in ensuring that bank customers have access to their funds and can perform financial transactions 24 hours a day paid off during the COVID-19 lockdown as many customers were able to maintain social distancing by carrying out financial transactions on numerous digital platforms.

Some of the electronic platforms banks generated revenue from in the first nine months were Automated Teller Machine transactions, USSD, online transfer, electronic bills payments, Remita, Point of Sale payments and agency banking, among others.

While some of the twelve banks were Access Bank Plc, First Bank of Nigeria Plc, First City Monument Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, United Bank for Africa Plc and Sterling Bank Plc.

The other five were Jaiz Bank Plc, Union Bank of Nigeria Plc, Wema Bank Plc, Unity Bank Plc and Stanbic IBTC Plc.

A breakdown of the banks’ unaudited financial statements showed Access Bank’s revenue from electronic payments rose by 105 percent to N38.80 billion in the period under review, up from N18.96 billion posted in the same period of 2019.

First Bank’s electronic payment revenue stood at N34.59 billion, representing an increase of 0.5 percent over the N34.42 billion recorded in the corresponding period of 2019.

Similarly, fees and commissions FCMB earned from digital payments in the first nine months amounted to N6.62 billion, a 17 percent contraction from the N7.98 billion earned in the same period of 2019.

Jaiz Bank posted a 24 percent contraction on its electronic payment earnings from N406.65 million in 2019 to N309.55 million in the same period in 2020.

Also, Stanbic IBTC’s electronic earnings dropped by 15 percent from N2.49 billion posted in 2019 to N2.12 billion in 2020.

Fidelity Bank’s e-payments revenue contracted by 34 percent in the first nine months of the year to N1.74 billion, down from N2.63 billion in 2019. While GTBank posted a 26 percent decline in electronic banking income to N8.21 billion in the period under review, below N11.04 billion earned in the same period of 2019.

Union Bank Plc realised N5.34 billion from electronic payments charges in the first three quarters of the year. Meaning, the bank’s electronic payments decline by 5 percent to N5.6 billion.

For Sterling Bank Plc, electronic products earned the bank N4.31 billion in the very first nine months of 2020, again a reduction of 16 percent from N5.11 billion posted in the same period of 2019.

UBA Plc, Unity Bank and Wema Bank Plc generated N26.71 billion, N1.74 billion and N2.02 billion from electronic payment income, respectively.

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Finance

Ghana/Kenya: Eurobonds to Decouple as Fiscal Challenges Come to Fore

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Ghana and Kenya, two of the sub-Saharan African sovereigns with the highest amount of outstanding Eurobonds, could see a widening of their risk premiums over 2021, according to a Senior Credit Analyst at Redd Intelligence, Mark Bohlund.

Faced with fiscal challenges, the two African nations are expected to return to the Eurobond market in the first quarter of 2021, but this time with bigger risk premiums as investors are expected to incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.

Mark Bohlund said, “Ghana and Kenya are likely to return to the Eurobond market in 1Q21 but see a widening of their risk premiums over 2021 as investors incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.”

With Ghana’s outstanding Eurobonds presently estimated at US$10.3 billion and Kenya’s outstanding Eurobonds put at US$6.1 billion, spreads on Ghana’s Eurobonds will increase over those of Kenya in 2021.

It is likely that spreads on Ghana’s eurobonds over those of Kenya will increase over 2021 as concerns rise over its weak fiscal position and high reliance on commercial overseas financing,” Bohlund stated.

Commenting on the countries’ fiscal positions, Bohlund said both countries are likely to post double-digit fiscal deficits this year, as contracting economies add to already faltering government revenue.

“With interest costs absorbing close to 50% of government revenue, Ghana will struggle to find sufficient cost- savings in other areas to reduce the fiscal deficit substantially in 2021.”

“In contrast to Kenya, Ghana has already cut back its capital expenditure to a bare minimum. The Bank of Ghana stepped up its purchases of government bonds sharply in September and we expect this to continue during 2021.

“In Kenya, part of the solution should be to encourage county governments to raise more revenue, but this will be challenging to implement before the August 2022 elections.

“Having shied away from bi- and multilateral creditors in favor of commercial borrowing, Ghana is likely to struggle to secure sufficient external financing in 2021. This makes increased central bank financing likely and poses downside risks to the cedi.

“Neither Ghana nor Kenya is likely to seek DSSI participation in 1H21 even if they deem that international bond issuance will not be possible.

“We have changed our view and now expect both Ghana and Kenya to issue Eurobonds in 1H21.

“Kenya is likely to continue to draw on funding from the IMF, the World Bank and other multilateral creditors, as well as bilateral financial support from China as the Standard Gauge Railway, continues to bleed funds.”

Bohlund added that the spreads between Ghana and Kenya Eurobonds are likely to widen further as a higher risk of a debt restructuring is priced into Ghanaian assets.

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