- Interbank Rate Rises on Cash Outflow
The Nigerian Interbank Offered Rates (NIBOR) closed at an average of 11.5 per cent on Friday, up from the seven per cent it was the preceding Friday as payments for bond and treasury bills purchases drained liquidity from the money market.
The Debt Management Office last week raised N214.95 billion from local currency bonds at its first auction this year, with payment for the bonds due last Friday.
According to Reuters, traders said the lending rate jumped on Friday as some banks scrambled for cash to pay for bonds and treasury bills.
Meanwhile, activities in the money market last week remained dictated by system liquidity. The week opened with improved system liquidity of N256.7 billion, indicating a N91 billion increase as against previous Friday. During the week, the CBN sold N208.9 billion worth of open market operations (OMO) instruments and N268.9 billion of treasury bills. The Treasury bills market experienced mixed sentiment during the week as average yield rose on two out of five sessions. The week started with sell-offs across short to medium term instruments as investors positioned for the OMO auction (143-day and 297-day instruments issued at 18.0% and 18.6% marginal rates) announced by the CBN.
“In the week ahead, there are no maturing securities and we expect money market rates to trade in double digits barring any major inflow into the system, while activities in the treasury bills market trade mildly bullish,” analysts at Afrinvest Africa Limited stated.
Forex Market Review
Activities in the foreign exchange (forex) market last week remained besieged by liquidity crunch in all segments of the market. At the Interbank, the CBN continued daily dollar interventions in order to meet some dollar demands and also contain intra-day interbank rate movement on all days during the week.
Accordingly, interbank rate hovered within a tight band of N305.25/$ and N305.5/$ at market close during the week. On the other hand, rates at the parallel market experienced some volatility as the naira recorded marginal gains against the dollar – appreciating to N495/$ – as the CBN resumed sales of the greenback to BDCs at the start of the week before depreciating to N498/$1 on Friday.
At the futures market, the value of open FX Futures contract at the end of the week rose to $3.9 billion from $3.8 billion last week.
However, the first monetary policy committee (MPC) meeting for 2017 will holding this week and analysts anticipate that the operations of the FX market and its impact on foreign funds inflow into the Nigerian market will be a talking point at the meeting.
“However, we do not think a major shift in the management of the foreign exchange market will be announced at the end of the meeting. Also, the approval of the Medium Term and Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) with exchange rate projection of N305.00/US$1.00 suggests that the controls in the FX market will persist in the short-term. Thus, we expect rate at the official market to remain at similar level in the week ahead whilst the parallel market remains pressured,” Afrinvest added.
Bond Market Review
Activities in the local bonds market was largely bearish as investors sold–off on a range of instruments in preparation for the Bond auction held mid-week and in response to result of the auction which showed the auctioned instruments were issued at higher yields. Thus, average yield across benchmark bonds rose on all trading sessions save for Monday (down 52bps) and Friday (down 4bps). The week started on a bullish note as yields closed 52bps lower on average but sentiment turned bullish in subsequent sessions with yields closing the week at 16.5% on average, representing a 22bps increase week-on-week.
Similar to the preceding week, the performance of Nigerian Corporate Eurobonds, sentiment was bullish as yields fell across a range of instruments save for the ACCESS 2021 and ACCESS 2017 (which inched higher by 0.2% apiece week-on-week) as well as FIRST BANK 2021 (up 4bps week-on-week).
Coincidentally, the FIRST BANK 2021 commands the highest year-to-date price return (+3.9%), due to strong buying interest earlier in the year, while ACCESS 2021 and ACCESS 2017 have recorded the worst performance with year-to-date losses of 0.2% apiece.
The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele last week debunked the insinuations in some quarters that policies of the government were meant to few the few in the society. He explained that the monetary policy stance of the central bank was always designed to serve the best interest of majority of Nigerians. Emefiele also noted that the “policies were put in place to help Nigeria pull through the hard time.”
He observed that the country found itself in the present situation due to lack of appropriate commitment to economic diversification, especially when the earnings from oil were as high as $140 per barrel, just as he noted that earnings of the government had risen to height of $3.2 billion and fell to about 500m per month recently. According to the governor, there was also a time when the crude oil price stabilised at $105 per barrel over a period of five years.
“What did we do with the huge accretion to the reserves then?” he queried in a statement yesterday.
Emefiele therefore, counseled the critics of the CBN and government policies that “priority will be given to Nigerian masses by managing the limited resources to provide for industrial raw materials, plants and equipment and agricultural inputs in order to create employment and generate wealth.”
The Bureaux De Change (BDCs) licenced by the CBN are not part of parallel market operators, the Association of Bureaux De Change Operators of Nigeria (ABCON) declared last week. ABCON President, Aminu Gwadabe, in a statement, distanced his members from the activities of parallel market operators, which have constituted major setback to naira’s stability. He insisted that CBN-licenced BDCs are not parallel market operators as misconstrued by a large section of the public and even top government officials. Gwadabe disclosed that CBN-licenced BDCs, which are 3,147 operators at present, are key partners of the CBN in ensuring the stability and competiveness of the naira against world currencies, including the dollar.
He said licensed operators had been given up to December 31 by the CBN to renew their annual licensing fee of N250,000, are registered with the Corporate Affairs Commission (CAC) and with each operator meeting the mandatory N35 million capital base stipulated by the apex bank.
Gwadabe disclosed that the Finance Minster, Mrs. Kemi Adeosun severally accused the BDC parallel market operators of contributing to the continuous depreciation of the naira, but insisted the licensed BDCs do not fall within the category being described by the minister because they operate based on set guidelines.
The ABCON chief said the licensed BDCs, not only have their operational offices, they file reports with the Federal Inland Revenue Services (FIRS) and belong to ABCON, which is recognised by the apex bank as the umbrella body for licensed BDCs.
Gwadabe said the licensed BDCs are committed to naira’s stability at both official and parallel markets, and have consistently partnered with the CBN to achieve this objective.
Bitcoins, Virtual Currencies
The central bank last week warned commercial banks, other financial institutions under its regulation as well as Nigerians against transacting business in anyway with the use of virtual currencies (VCs). Some types of VCs include Bitcoins, litecoin, darkcoin and peercoin. The central bank also advised banks to ensure that existing customers that are virtual currency exchangers, have effective Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) controls that would enable them comply with customer identification, verification and transaction monitoring requirements.
“Where banks or other financial institutions are not satisfied with the controls put in place by VC exchangers/customers, the relationship should be discontinued immediately; and any suspicious transactions by these customers should immediately be reported to the Nigerian Financial Intelligence Unit (NFIU),” it added.
The CBN noted that the emergence of VCs had attracted investments in payments infrastruture that provides new methods for transmitting value over the internet. Transactions in VCs are largely untraceable and annonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism, the central bank stated.
Ecobank Partners NiDCOM to Mobilise Nigerians Abroad for National Development
In a bid to fulfill it’s objectives and mandate, the Pan African Bank has promised to support Nigerians living and working abroad through it’s partnership with NiDCOM.
The Managing Director, Ecobank Nigeria, Patrick Akinwuntan has stated that the bank is privileged to work closely with the Nigerians in Diaspora Commission, (NiDCOM) and will continue to pursue one of its key mandates of helping to enhance the economic development and integration of Africa through its support to Nigerians living and working abroad.
Speaking at the maiden edition of the Diaspora Quarterly Lecture Series with Ecobank as the sole banking partner which took place on Saturday, 8th May 2021, he noted that Ecobank remains a critical bridge for Nigerians abroad, as it has made huge investments in the necessary platforms to enable them connect with home seamlessly. The event held online and had over 2000 participants from across all the continents in attendance.
“Nigerians in the diaspora play a major role in nation building, their contribution goes a long way to catalyse economic development. For us at Ecobank, we are a pan-African institution positioned to foster the economic growth and integration of our continent, so we are particularly pleased to work closely with the Nigerians in Diaspora Commission (NiDCOM), ably led by the Chairman/CEO, Hon Abike Dabiri-Erewa”.
“We are committed to ensuring that every Nigerian living abroad is able to remit home seamlessly and affordably, access viable investment opportunities and as the financial institution of choice for Nigerians abroad, we have deployed the necessary resources to actualise this.” He stated.
The Minister of Interior, Ogbeni Rauf Aregbesola, who was also present, reiterated the readiness of the government to collaborate with Nigerians in the diaspora, highlighting the new processes put in place to facilitate passport issuance, noting that all backlog of passport applications would be cleared by the end of May 2021.
Also speaking, the Hon. Minister of State, Foreign Affairs Amb. Zubairu Dada said harnessing the human capital and material resources of Nigerians in the diaspora towards the socio-economic, cultural, and political development of Nigeria can no longer be ignored. He pointed out that the Nigerian diaspora community is well educated, resourceful, skilled, and exposed to global best practices.
The NiDCOM Chairman/CEO, Hon. Abike Dabiri- Erewa explained that the Diaspora Quarterly Lecture Series is projected to be a major aspect of national discourse, where Nigerians abroad can be kept abreast of the government’s policies, programmes and projects.
Increase in Price Boosts Revenue of Dangote Sugar by 41.5 Percent in Q1 2021
Revenue of Dangote Sugar Refinery Plc rose by 41.5 percent to N67.394 billion in the first quarter (Q1) of 2021 from N47.643 billion recorded in the same quarter of 2020.
According to the leading sugar manufacturer, the increase in revenue was a result of the increase in the price of sugar in the first quarter. The company claimed price adjustment was necessary to mitigate the negative effect of inflation and depreciation on the company.
Volumes only rose by 5.7 percent during the quarter despite a 41.5 percent increase in revenue, meaning the increase in price was the main sales catalyst.
In the company’s unaudited financial statements, gross profit grew from N12.721 billion in Q1 2020 to N18.044 billion in Q1 2021.
Similarly, operating profit stood at N15.884 billion, up from N10.747 billion posted in Q1 2020.
Finance cost more than double from N1.353 billion in Q1 2020 to N3.412 billion in Q1 2021.
Dangote Sugar’s profit before tax rose from N9.509 billion recorded in the corresponding quarter to N11.949 billion in the quarter under review.
The company paid N3.646 billion in income tax, slightly higher than N3.137 paid in the same quarter of 2020.
Profit for the period grew from N6.372 billion in Q1 2020 to N8.302 billion in Q1 2021.
Commenting on the company’s performance, Dangote Sugar said “EBITDA increased by 34.7% to N17.02 billion (2020: N12.64 billion) on account of increased earnings. Group profit after taxation for the period increased by 30.3% to N8.30 billion (2020: N6.37 billion) reflecting management’s unrelenting drive to deliver consistent shareholder value.”
On price increase, the company hinged it on series of devaluation carried out in 2020 by the Central Bank of Nigeria (CBN), escalating inflation, port congestion and rising in price of global sugar. Dangote Sugar said its imported raw sugar from Brazil under Federal Government’s backward integration plan.
“We have continued to witness high cost of raw materials, energy costs and other input costs due to rising inflation and FX rate fluctuation. Further cost escalation is anticipated in the year as inflationary pressure mounts,” the company said.
FBN Holdings Suffers 39 Percent Drop in Profit to N15.6 Billion in Q1 2021
FBN Holdings Plc profit after tax declined by 39 percent from N23.140 billion recorded in the first quarter (Q1) of 2020 to N15.6 billion in the first quarter of 2021.
In the leading financial institution’s unaudited financial statements released through the Nigerian Exchange Limited, gross earnings declined by 14.5 percent to N137 billion in the period under review, down from N160 billion filed in the previous quarter.
Similarly, net interest income declined from N60.253 billion achieved in Q1 2020 to N52.793 billion.
Net interest income after impairment charge for losses also dipped from N50.547 billion in Q1 2020 to N39.619 billion in Q1 20201. While net fee and commission income rose from N20.773 billion in Q1 2020 to N28.427 billion in Q1 2021.
Profit before tax declined by 34 percent to N18.906 billion in the quarter under review, down from N28.680 billion posted in the corresponding quarter of 2020.
FBN Holdings paid N3.285 billion in income tax in the first quarter of 2020.
Therefore, profit for the period stood at N15.621 billion. While Net Assets contracted from N765.2 billion to N764.8 billion.
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