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Cost of Funds Ease on Liquidity Injection

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Interbank rate
  • Cost of Funds Ease on Liquidity Injection

The Nigerian Interbank Offered Rate (NIBOR) dropped 6.5 percentage points to five percent on average last Friday as the money market was awash with cash from budgetary disbursal and coupon payment on matured bonds.

The cost of borrowing among commercial lenders had closed at 11.5 per cent the preceding Friday due to drop in liquidity in the market necessitated by bond and treasury bills sales.

According to Reuters, about N400 billion was injected into the banking system last Wednesday from December budget allocations to states and local governments, while N49 billion coupon on matured bonds was released by the central bank on Friday, boosting liquidity and forcing down interbank rate.

On Thursday, the central bank withdrew around N217 billion through the sales of short-dated open market operations (OMO) bills in a bid to reduce the level of excess liquidity in the banking system, but market liquidity remains high.

Balance in commercial lenders’ accounts with the central bank stood at N254.46 billion surplus on Friday, as against N202.58 billion the preceding week.

“We strongly believe that the central bank will conduct more OMO next week to take out the excess cash from the system,” one trader said, adding that expected dollar sales at a special forex auction could also help reduce the liquidity level and seen rate rising again.

The naira was unchanged at N498 to the dollar on the parallel market and N305.25 per dollar on the official interbank window on Friday as the market awaited the result of a special forex auction targeted at selected sector of the economy.

The central bank had on Wednesday asked commercial lenders to submit backlog dollar demand from fuel importers, airlines, raw-materials producers, and makers of agricultural chemicals and machinery for manufacturers.

The stock market main index rose 0.15 percent to 26,328 points, higher level since January 16, driven by gains in energy company Oando, which was up 4.05 percent and local French Total tick up 4.9 percent.

Monetary Policy Committee

The Monetary Policy Committee (MPC) at the end of its first meeting in 2017 held last week resolved to retain all its monetary policy instruments.

Specifically, the MPC kept the Monetary Policy Rate (MPR) at 14 per cent, the cash reserve requirement (CRR) at 22.5 per cent; also held the liquidity ratio at 30 per cent; and retain the asymmetric corridor at +200 and -500 basis points around the MPR. While reading the MPC communique, Emefiele said the committee was of the view that the key undercurrent that is scarcity of FX, low fiscal activity, high energy prices and the accumulation of salary arrears – cannot be directly ameliorated by monetary policy actions. He said the committee also anticipated that the recent increase in oil prices would be complemented by production gains to provide the needed tailwinds to sustainable economic activity.

In that regard, the committee commended the commitment of the fiscal authorities to step up efforts to fill the aggregate demand gap through a speedy resolution of the domestic indebtedness of the federal government to states and local contractors. The Committee believes that doing so will aid the effort towards economic recovery.

“Total foreign exchange inflows through the CBN increased significantly by 82.45 per cent in December 2016 owing mainly to the increase in oil prices.

Total outflows, however, spiked during the same period. The Committee noted that the average naira exchange rate remained stable at the inter-bank segment of the foreign exchange market in the review period.

Naira Value

The Central Bank of Nigeria (CBN) last week said it was working assiduously with the fiscal authorities to preserve the external reserves as well as to safeguard the value of the naira.

The central bank’s acting Director, Corporate Communications, Isaac Okorafor, said it had observed with great concern the continued and unwarranted attack on its policies by a group of Nigerians, whose real interests, findings had shown was anything near altruistic but rather self-serving and unpatriotic.

The banking sector regulator said while it respects the rights of every Nigerian or stakeholder to their respective views, it found it curious that certain interests had remained persistent in their move to misinform the larger public, with the intention of discrediting genuine efforts at managing the economy, thereby creating panic within the financial system.

It said Intelligence reports at its disposal revealed the involvement of some influential interests funding the push to have the CBN and the federal government reverse its forex policy which is aimed at conserving foreign exchange and also promoting exports.

“As the Bank has explained severally, its decisions on forex management were prompted by the challenge the country’s reserves suffered at the time, arising from issues such as speculative attacks and round tripping.

” It is pertinent to note that pressures on the country’s foreign reserves persisted due to a huge fall in the monthly foreign earnings, which fell from over US $3.2 billion to as low as $400 million at a time when the demand for the US dollar, particularly by importers, continued to rise considerably,” it added.

Inequality and Poverty

The Managing Director of the International Monetary Fund (IMF), Christine Lagarde last week bemoaned the high level of inequality in Africa.

The IMF boss while commenting on her Visit to Uganda, stressed that growth was essential for improving the lives of people in low-income countries. This, she said should benefit all parts of society.

She noted that in sub-Saharan Africa, presently, it is more than twice as expensive to move from rural to urban areas than it is in China. Furthermore, she said only a third of sub-Saharan African households have electricity, compared to 85 per cent in the rest of the world.

“And in low-income countries, only about 20 percent of the adult population has a bank account, compared to more than 80 percent in the rest of the world. Such barriers get in the way of successful and equitable reforms.

Infrastructure development and financial sector reforms are examples.

“More, and more efficient, spending on roads, airports, power grids and education help an economy grow more productive and make it easier for people to relocate from farms to cities.

Fitch on Nigeria’s Outlook

Fitch Ratings last week revised the outlook on Nigeria’s long-term foreign and local currency Issuer Default Ratings (IDRs) to negative from stable and affirmed the country’s IDRs at ‘B+’. The issue ratings on Nigeria’s senior unsecured foreign currency bonds was also been affirmed at ‘B+’. Similarly, the country’s ceiling was affirmed at ‘B+’ and its short-term foreign and local currency IDRs was affirmed at ‘B’. The global rating agency attributed its decision to revise the outlook on Nigeria’s long-term IDRs to the country’s tight foreign exchange (FX) liquidity and low oil production. These according to Fitch contributed to Nigeria’s first recession since 1994. The Nigerian economy contracted through the first three quarters of 2016 and Fitch estimated Gross Domestic Product (GDP) growth of -1.5 per cent in 2016 as a whole.

“We expect a limited economic recovery in 2017, with growth of 1.5 per cent, well below the 2011-15 annual growth average of 4.8 per cent. The non-oil economy will continue to be constrained by tight foreign exchange liquidity. Inflationary pressures are high with year on year consumer price index (CPI) inflation increased to 18.5 per cent in December.

“Access to foreign exchange will remain severely restricted until the Central Bank of Nigeria (CBN) can establish the credibility of the Interbank Foreign Exchange Market (IFEM) and bring down the spread between the official rate and the parallel market rates. The spot rate for the naira has settled at a range of N305-N315 per dollar in the official market, while the Bureau de Change (BDC) rate depreciated to as low as N490 per dollar in November 2016.

Power Sector Firms in 60% FX Allocation

Desirous of revamping the country’s ailing power sector, the MPC last week told commercial banks and other authorised dealers in the foreign exchange (FX) market to include power sector operators in its FX allocation policy which stipulated that 60 per cent of total FX purchases from all sources (interbank inclusive) should be channelled to the manufacturing sector. Therefore, Emefiele, urged operators in the power sector to take advantage of the priority FX allocation given to the sector to enhance their operations.

“The 60 per cent that has been set aside of all FX that is available to all the banks to manufacturers, we did that for a purpose because we felt that there is need to support manufacturing sector. There is need to ensure that FX is made available to those that will provide jobs and get the manufacturing and industrial output to look positive. And I am happy that the recent data released by the Nigerian Bureau of statistics has started to show that the Purchasing Manager’s Index (PMI) is looking upward.

“The 60 per cent that is set aside for the manufacturers, I dare say that those in the power sector also qualify for that because they are importing plants and equipment or components for their transformers and generators for their machines. I don’t mean generators that people will put in their houses and generate electricity for themselves. We will appeal to the banks to look in their directions increasingly,” Emefiele explained.

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

CBN Pays N14.35 Billion for 263,860 Meters to End Estimated Billings

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prepaid meter

CBN Pays N14.35 Billion for 263,860 Meters to End Estimated Billings

The Central Bank of Nigeria (CBN) said it has disbursed a total sum of N14.35 billion to the Distribution Companies of Nigeria (DisCOs) for the payment of 263,860 meters under the National Mass Metering Programme (NMMP).

In November 2020, the Federal Government announced that it would make funds available for 1 million meters in the first phase of President Buhari Mass Metering Initiative at no cost to consumers.

Between November 2020 and January 2021, the Federal Government through the CBN has disbursed N14.35 billion.

However, according to the apex bank DisCOs must pay back the amount disbursed based on the previously agreed amortisation schedule.

The facility disbursed is a loan that must be repaid by the DisCos on the basis of the previously agreed amortisation schedule. The repayment is to be deducted from payments made by consumers into the DisCos accounts with Deposit Money Banks (DMBs),” the CBN stated.

The maximum tenor of the facility is 10 years but not exceeding 2030, while the moratorium on the principal amount is for a period not exceeding 24 months from the date of loan disbursement.

A week ago, the Ibadan Electricity Distribution Company (IBEDC) announced it has commenced the distribution of 104,0000 free meters in Ibadan, Oyo State.

This, the IBEDC said was under the ongoing National Metering Scheme of president Muhammadu Buhari.

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FG Borrows N2.36 Trillion from Capital Market in 2020

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President Buhari

FG Borrows N2.36 Trillion from Capital Market in 2020

Mr. Oscar Onyema, the Chief Executive Officer, Nigerian Stock Exchange, said the Federal Government borrowed N2.36 trillion from the nation’s capital market in 2020.

The CEO disclosed this at the 2020 market recap/2021 outlook held on Tuesday.

He said the Federal Government issuances account for 92 percent of the total bond issued in the market in the year.

Onyema further explained that corporate organisations leveraged on low yield environment to expand and embark on debt refinancing, raising a total of N192 billion,

Capital-raising activities in the fixed income market increased significantly in 2020. The NSE’s bond market capitalisation rose by 35.52 per cent from N12.92tn in 2019 to N17.50tn,” he said.

Onyema noted that “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses, but largely remained resilient and orderly amid rising uncertainty.

“For The Exchange, renewed investor optimism coupled with improved economic conditions and low fixed income yields, propelled a year end bull run. Of 93 global equity indices tracked by Bloomberg, the NSE All Share Index emerged the best-performing index in the world, surpassing the S&P 500 (+16.26 per cent), Dow Jones Industrial Index (+7.25 per cent) and other global and African market indexes, to post a one-year return of +50.03 per cent.

Speaking on product results for the year, the CEO said, “The Nigerian equities market got off to a strong start in 2020, returning 10.4 per cent by the eighth trading session. By October, the equities market entered a much-awaited bull run.

“Buoyed by the formal declaration of the US president-elect, unattractive fixed income yields and better-than-expected corporate earnings, the NSE ASI recovered from Q1’20, to close the year at 40,270.72 (+50.03 per cent) and erase losses of -14.90 per cent recorded in 2019.

“During its remarkable year end run, the ASI gained 6.23 per cent in a single trading session which triggered a 30-minute halt of trading on all stocks for the first time since the NSE Circuit Breaker was introduced in 2016 to safeguard market integrity in periods of extraordinary volatility.

“At the close of the year, the NSE’s equity market capitalisation was up by 62.42 per cent, from N12.97tn in 2019 to N21.06tn in 2020 while market turnover saw an uptick of 7.25 per cent, from N0.96tn in 2019 to N1.03Tn in 2020.

“Although Initial Public Offering activity was mute, the value of supplementary issues increased dramatically from 2019, rising by 851.37 per cent to N1.42tn, from N148.77bn.

“Also noteworthy is that for the second consecutive year, equity market transactions were dominated by domestic investors who accounted for 65.28 per cent of market turnover by value (retail: 44.98 per cent; institutional: 55.02 per cent) while foreign portfolio investors accounted for 34.72 per cent.”

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Airtel to Announce Financial Results for Nine Months Ended December 31, 2020 on 29 January 2021

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Airtel Financial Results

Airtel to Announce Financial Results for Nine Months Ended December 31, 2020 on 29 January 2021

Airtel Africa, one of the leading telecommunications companies in Africa, on Wednesday announced it will report its financial statements for the nine months ended December 31, 2020 on January 29, 2021.

The telecom giant disclosed in a statement signed by Simon O’Hara, Group Company Secretary.

The statement reads “Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, will announce its results for the nine months to 31 December 2020 on 29 January 2021.

“Management will host a conference call on the day of results for analysts and investors at 2:00pm GMT.

“Participants are requested to pre-register for the call by navigating to:
www.diamondpass.net/4467631

“Once registered, participants will receive a calendar invitation with the dial in details for the call.”

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