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CBN Mops up N391bn Through TB Sales

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FG Borrows
  • CBN Mops up N391bn Through TB Sales

The Central Bank of Nigeria (CBN) sold about N391 billion treasury bills on Friday, lifting the interbank lending rate up to 12 percent.

The central bank sold N82 billion in 181-day treasury bills at 18 per cent and N309 billion at 18.6 percent, mopping up liquidity from the money market and pushing up the cost of borrowing among commercial lenders.

“We have some major placers quoting about 20 per cent for overnight placement, but most takers are not willing to borrow at that rate,” one dealer told Reuters, adding that the rate eventually settled around between 10 percent and 12 percent.

Markets had opened on Thursday with a surplus liquidity of about N467 billion due to an injection of matured treasury bills until the central bank later debited banks for the purchases of N302.4 billion in primary market treasury bills.

Traders said the central bank on Friday further moved to reduce liquidity with the sale of open market operations bills, which fetched returns above the inflation rate.

The government had raised N302.4 billion at Wednesday’s treasury bills auction, more than the N242 billion planned due to strong demand for the one-year debt, while payment for the purchased was debited from commercial lenders’ accounts on Friday.

The naira traded flat at both official interbank window, but parallel market traders quoting the naira at N500 to the dollar. Commercial lenders quoted the currency at 305.25 a dollar, about the level it has traded since August.

Forwards Auction

The CBN last week sold $660 million in three- and five- month currency forwards at an auction aimed at clearing a backlog of dollar demand. The central bank had at the preceding Wednesday asked commercial lenders to bid in a special currency auction targeted at clearing backlog of dollar obligations of manufacturing, airlines, agriculture and petroleum sector. The results of the auction were announced last Tuesday while payment for the dollar sales was due last Wednesday. This was the first major dollar sales to the key sector by the central bank this year in a bid to spur growth and revive the economy which slipped into recession last year due to currency crisis necessitated by drop in global oil prices.

$1 Billion Eurobond

The federal government last week met investors for its first Eurobond sale in more than three years as Africa’s most populous nation battles an economic contraction and the worst dollar squeeze in almost a decade. This was just as Standard & Poor’s (S&P), a global financial services and ratings company assigned the proposed $1 billion Eurobonds a ‘B’ issue ratings. The agency stated this in a note on the debt issue. Officials last Friday commenced roadshows in London and the U.S. before the proposed issue of 15-year bonds, the country’s longest-maturity dollar notes yet, according to a person familiar with the matter, who is not authorised to speak publicly told Bloomberg. Finance Minister Kemi Adeosun and the central bank’s Deputy Governor Sarah Alade led the meetings, to be organised by Citigroup Inc. and Standard Chartered Plc. The delegation also included Udo Udoma, the budget minister, and Abraham Nwankwo, head of the Debt Management Office. The dates for the roadshow are: London: February 3, Los Angeles: February 6, Boston: February 7 and New York: February 8.

Four Skye Bank’s EDs Resign

Skye Bank Plc on Friday announced the voluntary resignation of four of its Executive Directors from the services of the bank. The directors who resigned were Mr. Idris Yakubu, Mrs. Markie Idowu, Mrs. Abimbola Izu and Mr. Bayo Sanni. The Directors had served in Executive Management capacity for nearly two years and had been part of the new Board of the Bank, which came into being following the intervention of the Central Bank of Nigeria on July 4 2016.

In a notification to the Nigerian Stock Exchange (NSE) the Group Managing Director of the bank, Mr. Tokunbo Abiru thanked the Executive Directors for their service to the comercial bank, noting that they had contributed immensely to the successful leadership transition which commenced last year. The bank has also announced that “the new development does not in any way affect the smooth running of the bank as it continues to deliver services to its customers across the country. The portfolios of the directors have been assigned to some General Managers to ensure a seamless transition.”

Manufacturing Index Declines in January

The Manufacturing Purchasing Managers’ Index (PMI) stood at 48.2 index points in January 2017, indicating a decline in the manufacturing sector during the review period. The index averaged 45.2 in the last twelve months, and had grown in December 2016 after recording declines for 11 consecutive months. The PMI is an indicator of the economic health of the manufacturing sector. The January 2017 PMI report released last week by the central bank showed that 10 of the 16 sub-sectors surveyed recorded decline in the review month in the following order: primary metal; transportation equipment; paper products; electrical equipment; fabricated metal products; printing & related support activities; cement; furniture & related products; plastics & rubber products; and chemical & pharmaceutical products. The remaining six sub-sectors were expected to expand in the order: petroleum & coal products; appliances & components; nonmetallic mineral products; food, beverage & tobacco products; textile, apparel, leather & footwear; and computer & electronic products.

Transactions Settlement

The CBN last week warned that any authorised dealer that defaults in the settlement of any auction or 2-way quote with the CBN in the financial market would be duly punished. The punishment includes suspension from all auctions as well as from its discount window. The central bank stated this in a circular to all authorised dealers titled: “Amendment of S4 Business Rules and Guidelines,” dated February 1, 2017, that was signed by its Director, Financial Markets Departments, Dr. Alvan Ikoku. Specifically, the amendment was with reference to Section 10.1 of the S4 Business Rules and Guidelines. The directive was with immediate effect.

It stated: “Any auction of 2-way quote with the CBN must be settled. If it is on queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction. Where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks from the date of default.

“ILF shall be bought back or converted to Standing Lending Facilities (SLF) by the participant by the close of business day, failing which it shall be automatically converted to SLF at the prevailing SLF rate plus 500 basis points.

“If any SLF is not repurchased by the participant bank by the next business day, such participants shall not be eligible to access the discount window until such outstanding obligation is settled in accordance with Section 27 of the Guidelines for the Conduct of Repurchase Transactions under the CBN Standing Facilities.”

Governance and Equitable Growth

A new World Bank policy report last week urged developing countries and international development agencies to rethink their approach to governance, as a key to overcoming challenges related to security, growth, and equity.

The 2017 World Development Report titled: “Governance and the Law,” explored how unequal distribution of power in a society interferes with policies’ effectiveness. Power asymmetries helped explain, for example, why model anti-corruption laws and agencies often fail to curb corruption, why decentralisation does not always improve municipal services; or why well-crafted fiscal policies may not reduce volatility and generate long-term savings.

The report noted that when policies and technical solutions fail to achieve intended outcomes, institutions often take the blame. However, it found that countries and donors need to think more broadly to improve governance so that policies succeed. It defined better governance as the process through which state and non-state groups interact to design and implement policies, working within a set of formal and informal rules that are shaped by power.

“As demand for effective service delivery, good infrastructure, and fair institutions continues to rise, it is vital that governments use scarce resources as efficiently and transparently as possible,” World Bank Group President Jim Yong Kim said.

Diaspora Bond

The federal government last week asked Goldman Sachs and Stanbic IBTC Bank to advise it on the planned sale of a debut “diaspora bond” targeted at Nigerians living abroad. Africa’s biggest economy first announced plans to sell bonds targeting Nigerian nationals abroad in 2013 to raise about $300 million. Goldman Sachs and Stanbic were due to manage the sale at the time, but the government did not appoint any bookrunners ahead of the election in 2015 that brought President Muhammadu Buhari to power. United Bank for Africa last Monday said the lender had been appointed as one of the bookrunners on the diaspora bond deal. First Bank and Standard Bank were also appointed, a local newspaper reported, quoting the debt office. Nigeria is the world’s fifth-biggest destination for international remittances after China, India, the Philippines and Mexico, with five million Nigerians living abroad sending money back to relatives, according to Western Union. Remittances make up the second-largest source of foreign exchange receipts in Nigeria, after oil revenues.

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

Nasdaq Set To Launch Options Trading For Coinbase Global

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Less than a week after the largest crypto exchange in the U.S. Coinbase was listed, Nasdaq is set to start trading options for Coinbase Global.

According to Reuters, a representative for Coinbase stated that the COIN.O options will start trading on Nasdaq on Tuesday, April 20.

The launch of equity options will offer a new way for investors to bet on the fortunes of Coinbase. Equity options represent the right, but not the obligation, to buy or sell a stock at a certain price, known as the strike price, on or before an expiration date.

The news follows Coinbase’s direct listing, which saw the firm’s stock fluctuate between a valuation of $429.54 and $310 on its first day of trading.

It was reported that the Chief Executive Officer of Coinbase, Brian Armstrong sold less than 2% of his holdings which worth about $292 million in shares on COIN’s first day of trading. According to filings made with the U.S. Securities and Exchange Commission, Armstrong sold 749,999 shares in three batches at prices ranging from $381 to $410.40 per share for total proceeds of $291.8 million.

It was also reported that insiders dumped nearly $5 billion in COIN stock shortly after it was listed. Filings on the Coinbase Investor Relations website showed a total of 12,965,079 shares were sold by insiders, worth over $4.6 billion at COIN’s $344 share price at close on Friday.

Yahoo Finance reported the stock has slumped 22.5% from a high of $429.54 on April 14 to a current after-hours trading price of $332.75 where it appears to have settled after Monday’s trading session.

On April 20, Coinbase Pro announced that will add support for new trading pairs for Basic Attention Token (BAT), Cardano (ADA), Decentraland (MANA), and USDC from April 20. The four assets will be paired with three fiat currencies (USD, EUR, GBP), BTC, and ETH, with limited trading functionality to be made available while market liquidity is assessed at launch.

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Banking Sector

Unity Bank Grows Asset by 67.90% to N492.02 Billion, As Gross Earnings Hit N42.71 Billion in FY 2020

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Unity Bank Plc grew its assets base to N492.02billion representing a significant increase of 67.90% from the N293.05 billion of total assets value recorded in 2019. This is even as the agric-focused lender declared gross earnings of N42.71 billion within the period under review.

A review of the Bank’s audited results for full-year ended 31 December 2020, released to the Nigerian Stock Exchange, showed that the Bank improved its bottom line marginally as Profit After Tax, PAT stood at N2.09 billion. Profit Before Tax, PBT closed at N2.22 billion, in a year that was defined by the unmitigated impact of global pandemic characterized by disruptions in business activities and the general downturn that resulted in revenue/returns dip in major leading sectors globally.

The lender substantially grew its customers’ deposit portfolio to N356.62 billion, up from N257.69 billion in the corresponding period of 2019, representing a 38.4% growth. This affirms positive market uptake of the Bank’s product offerings, as well as the lender’s growing customer base to its recent aggressive push with agile customer-centric products, which has played a role in deepening financial services penetration, especially to a wider world, an underserved spectrum of the retail market.

Other major highlight of the audited financial statement relates to growth in its net operating income which rose to N25.46 billion from N23.21 billion in the corresponding period of 2019, representing a 9.71% increase. This is even as the net interest income recorded a significant jump, as it rose by 7.60% to N17.75 billion from N16.49 billion in the corresponding period of 2019. Earnings per Share closed at 17.85 Kobo.

The Bank’s gross loans portfolio increased by 92.9% to N206.2 billion in December 2020 from N106.9 billion in December 2019. The Bank’s lending strategy was specially tailored to support the nation’s food agenda. This had the added advantage of improving food security across the country, providing employment to thousands of youths and entrepreneurs, contributing to the conservation of FX stocks and mitigating security challenges by ensuring adequate empowerment of citizens and deepening skills acquisition across the value chain.

Commenting on the result, Unity Bank’s Managing Director/Chief Executive Officer, Mrs. Tomi Somefun stated that the results showed the resilience of the Bank during unprecedented times of uncertainties and our ability to innovate and focus on key balance sheet items that will enable us to maintain the growth trajectory.

She further opined that: “Consequently, for the year under review, the opportunities to significantly create more quality assets for the business, thought to have a sustainable impact, informed part of choices made and we have seen some encouraging market uptake in this regard, apart from the benefits to the enterprise bottom-line that have also started trickling in. Other key performance indicators especially on the liability side of the business were equally not left out. The Bank deployed new product features and augmentation supported by omni-channel, USSD promotions and other channels to enhance services delivery efficiency, drive income generation capacities and enhance steady balance sheet growth for the year”.

Looking ahead, Somefun stated: “we will latch on targeted strategies to deploy significant investment in technology in order to ride the waves of the COVID-19 pandemic. On the back of this, the Bank focuses on achieving major efficiency gains, deepening its retail footprints and penetrating identified cluster market segments, as bulwarks to tapping into various youth markets platforms, in addition to the mass market would get a further boost”.

While laying an outlook for the future, the Unity Bank’s Chief further stated: “The Bank is also looking to consolidate on the gains from its core business areas and niche in the agribusiness sector. The Bank has solidly financed over one million farmers over the past three years. These farmers cut across several primary crop production such as rice, maize, cotton, wheat, sorghum, etc coupled with their rich value chains, and we hope to continue to expand on this as we play our part in driving the country’s quest for self-sufficiency in food production.”

Analysts are of the view that has made an appreciable impact in the agribusiness and its value chains consistently, the market is excited that the current year performance and different initiatives of the Bank show that the agribusiness is bankable not only as a differential positioning but also for sustainable business performance and profitability.

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Banking Sector

Access Bank To Acquire BancABC Botswana

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Access Bank Plc on Monday disclosed that it had entered into a definitive and binding agreement with ABC Holdings Limited to acquire 78.15 per cent shareholding in African Banking Corporation of Botswana Limited (BancABC Botswana).

The transaction, which is subject to regulatory approvals and customary conditions precedent, is expected to close before the end of this quarter.

ABC Holdings is a subsidiary of London Stock Exchange listed group – Atlas Mara Limited.

Access Bank disclosed this in a statement signed by its Company Secretary, Sunday Ekwochi.

Bostwana is renowned for its quality sovereign credit rating and stability. Access Bank’s market entry is expected to further solidify its strategy as, “a strong banking partner in key verticals across retail and corporate banking, including especially supporting trade in payments across southern Africa and Sub-Saharan Africa more broadly.”

Commenting on the deal, the GMD/CEO, Access Bank, Herbert Wigwe, said: “We remain committed to a disciplined and thoughtful expansion strategy in Africa, which we believe will create strong, sustainable returns for our shareholders and stakeholders at large, over the medium and long-term.

“The establishment of Access Bank through this acquisition in the Republic of Botswana will position the bank to deliver a more complete set of banking solutions to its clients active in and across the SADC and COMESA regions.

“This transaction complements our recent strategic growth acquisitions in South Africa, Zambia and Mozambique. We are building a bank of the future that Africans across Africa and the world would be proud of and look forward to welcoming the employees, customers and other stakeholders of BancABC Bostawana to Access Bank.”

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