- Stakeholders Lament High Interest Rate
Capital market stakeholders have stressed the need for government to review the current interest rate downward to enable listed firms enhance profitability and increase investors’ access to the stock market.
The Central Bank of Nigeria (CBN) had maintained that the Monetary Policy Rate (MPR) remains at 14 per cent.But the Registrar Chief Executive, Institute of Capital Market Registrars (ICMR), David Ogogo,in an interview with The Guardian, bemoaned the current interest rate, saying that it is disincentive to investment for both foreign and indigenous investors, particularly , when compared to the current inflation rate.
According to him, if interest rate is reasonably low, listed firms can borrow long term loan, improve profitability and make more investment in the stock market.
“If interest rate is high, it would not be lucrative to investors to invest in the capital market when compared to the money market but if it is reasonably low, listed firms can go to the banks, borrow money and inject into the businesses and make profit.
“Then businesses would flourish and make more money to pay dividend because the interest rate repayment is not too much. This would encourage more investment in the stock market but if it high, companies cannot borrow because if they do, they cannot repay.”
A stock broker, Sola Oni explained that the relationship between interest rate and stock market is inverse. This, according to him, implies that when interest rate is low, speculators move their funds from the money market instruments to the stock market to make a kill.
As a corollary, the same speculators move from the stock market to other asset classes, especially, fixed income securities when the interest rate is high.
By this logic, he added that it is assumed that the current interest rate would boost investment in the fixed income securities while it may depress investors’ appetite for equity investment.
The Partner, Constant Partners Limited, Niyi Omojola said: “The current interest rate is posing a challenge to the market. Issuers do not want to borrow for a long period on a high rate; they would want to borrow on a short period.
“ The same thing with investors, as the interest rate is high, they do not know how the future looks like, so there is a temptation for investors to borrow at a short period also so you see exposures in commercial paper and short term borrowings and as long as the rate has gone up, it slows down issuers and long term investors.”
Insider Dealing: Paul Miyonmide Gbededo Adds Another 612,326 Shares of Flour Mills to His Stake
Paul Miyonmide Gbededo, the Group Managing Director, Flour Mills of Nigeria Plc bought an additional 612,326 shares of the company.
The management stated this in a disclosure statement sent to the Nigerian Stock Exchange on Monday.
The managing director purchased the shares at N27.75 per share on November 20, 2020 at the Nigerian Stock Exchange in Lagos, Nigeria. Meaning, Gbededo has invested another N16,992,046.5 into the company.
This was in addition to the 3,284,867 shares valued at N91,642,269 and 4,200,852 shares worth N117.62 million purchased by Gbededo earlier in the month of November. Bringing his recent purchases to 8,098,045 million shares worth N226,254,315.5. See the details of the latest transaction below.
FCMB Reports 16.4 Percent Increase in Profit After Tax in Q3 2020
FCMB Group Plc, one of the leading financial institutions in Nigeria, reported a 16.4 percent increase in profit after tax for the third quarter of the year.
In the unaudited financial statements released through the Nigerian Stock Exchange (NSE), the lender’s profit before tax grew by 10.2 percent year-on-year to N4.8 billion while profit after tax increased by 16.4 percent to N4.2 billion.
FCBMB Group Plc expanded gross earnings by 4.8 percent to N48.3 billion during the period under review. Similarly, the bank’s net interest income rose by 30.03 percent year-on-year to N22.7 billion.
The strong performance continued across the board as net fee and commission income increased by 0.29 percent to N5.2 billion. Net trading income rose by 39.4 percent year-on-year to N1.82 billion.
Personnel expenses dropped by 7.9 percent to N6.9 billion during the quarter while general and administrative expenses declined by 7.52 percent year-on-year to N7.6 billion. Largely due to the COVID-19 lockdown.
Loans and advances to customers rose by 10.8 percent to N793.14 billion between December 2019 and September 2020. Total desposits from customers during the same period grew by 26.7 percent to N1.2 trillion.
The bank’s total assets increased by 22.12 percent to N2.04 trillion.
Stanbic IBTC Obtains Approvals, License to Establish Life Insurance Subsidiary
Stanbic IBTC Holdings Plc on Friday announced that it has obtained all required Regulatory Approvals and a license from the National Insurance Commission to establish a wholly-owned Life Insurance subsidiary, Stanbic IBTC Insurance Limited (SIIL).
In a statement signed by Chidi Okezi, Company Secretary, Stanbic IBTC and released on Friday, the bank said “The establishment of this new subsidiary essentially complements the bouquet of product offerings by Stanbic IBTC as it continues its goal of being the leading end-to-end financial solutions provider in Nigeria. In this regard, SIIL will aim to facilitate long term insurance for already financially included individuals and will seek to become the preferred Insurer in the Life Insurance Business.
“Stanbic IBTC Holdings PLC, a member of Standard Bank Group, is a full-service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. The group’s largest shareholder is the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20.1% shareholding. In addition, Standard Bank Group and ICBC share a strategic partnership that facilitates trade deals between Africa, China and select emerging markets. Standard Bank Group is the largest African financial institution by assets. It is rooted in Africa with strategic representation in 21 countries on the African continent.
“Standard Bank has been in operation for over 158 years and is focused on building first-class, on-the-ground financial services institutions in chosen countries in Africa; and connecting selected emerging markets to Africa by applying sector expertise, particularly in natural resources, power and infrastructure.”
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