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Investors Gain N2.2tr in Bullish Run

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  • Stock Market H1 ’17: Investors Gain N2.2tr in Bullish Run

Reflecting uptick in economic activities buoyed by improved foreign exchange inflow courtesy of oil price rebound and increased foreign investment inflow occasioned by new foreign exchange policy of the Central Bank of Nigeria, CBN, investors’ fortunes on the Nigeria Stock Exchange (NSE) soared by whopping N2.2 trillion in the first half of the year (H1’17).

Specifically, the NSE market capitalisation, which represents total value of shares on the Exchange, went up by 23.8 per cent or N2.205 trillion to N11.5 trillion at the close of trading on Friday June 30th, 2017, against N9.246 trillion at the end of December 2016.

Also when compared with the corresponding period in 2016 (H1’16) the improved return on investment for investors represented 12.7 per cent growth from N10.165 trillion at the end of June 2016.

Analysis of the current NSE data shows the impressive H1’17 performance in the following sector indices: NSE All Share Index, which measures the price movement of stocks traded on the Exchange, surged by 23.2 per cent or 6,242.86 points to 33,117.48 points at the close of business on Friday from 26,874.62 points at the beginning of the year; the NSE 30 Banking Index surged by 448.5 per cent to 1,504.44 points from 274 points; NSE Industrial Index appreciated by 21.1 points to close at 1,932.20 points from 1,595.33 points; NSE Consumer Goods Index rose by 11.6 per cent to 795 .40 points from 712.65; NSE Insurance Index rose by 9.2 per cent to 137.86 points from 126.29 points; while NSE Oil and Gas index inched up by 3.4 per cent to 323.16 points from 321.68 points.

Further review of the market for H1’17 shows that the top 10 price gainers are: May & Baker Nigeria Plc, Fidson Healthcare Plc, United Bank for Africa, UBA Plc, Cement Company of Northern Nigeria, CCNN, First Bank Nigeria, FBN Holding Plc, Presco Plc. Others include: Beta Glass, International Breweries Plc, Access Bank Plc, and PZ Cussons Nigeria Plc.

Conversely, the top ten price losers are: Forte Oil Plc, 7up Bottling Company Plc, Meyer Plc, Trans-nationwide Express Plc, Tripple Gee Plc, University Press Plc. Others include: Union Dicon Salt Plc, Guinness Nigeria Plc, John Holt Plc, and AG Leventis Plc.

Analysts’ projections

The impressive growth aligns with projections by market operators and analysts at the beginning of the year. They had projected that 2017 would be better because the economy has recovered to levels last seen in 2015/16.

For example Ayo Teriba, an economist, in his projections for 2017, said: “The brighter outlook will be premised on government holding up some of the monetary and economic policies throughout 2017. But it is reasonable to expect that they would. If they do, Nigeria can expect a resumption of growth, a moderation of inflation, a return of stability to the foreign exchange market, a convergence of exchange rates, and a sustained strengthening of the inter-bank rate.”

Also analysts at ARM Research had stated: “In our H1 17 Nigeria Strategy Report, we projected a nuanced outlook for naira equities against the backdrop of subsisting reticence of foreign and local investors towards naira equities as well as weak fundamentals. Pertinently, US interest rate normalisation, rising political concerns on the global front and FX worries in the domestic market, continue to drive foreign apathy while local support continues to dissipate as rising yields which aside from raising discount rate for equity valuations provided a significantly compelling investment outlet in the fixed income market.

“Over the second quarter of 2017, political uncertainty in Europe, swelling predictions of geo-political crisis, prospects of further rate hike by the US Federal Reserve should continue to drive cautious approach to EM/frontier market investing. Whilst domestic FX markets have seen improved liquidity since March 2017, we expect Foreign Portfolio Investment, FPI participation to be gradual with more allocation in the FI market. Complicating the outlook for equities is the elevated domestic yield environment which works to dilute local investor interest in equities.”

Meanwhile, market operators and financial analysts have expressed optimism of better market performance in their projection for the third quarter of 2017 (Q3’17). They stressed that improvement in the monetary and fiscal policies, among other factors such as global oil prices will determine the sustainability of the bullish run witnessed in the just ended H1’17.

Top five stock price gainers

Details of the stock price movement showed that May & Baker Nigeria Plc, led the cream of price gainers in H1’17, appreciating by 312.8 per cent to close last Friday at N3.88 per share from 94 kobo per share on January 3rd, 2017. It was followed by Fidson Healthcare Plc, which went up by 117.2 per cent to close at N2.28 per share from N1.28 per share. UBA Plc came third on the H1’17 price gainers’ chart, rising by 94.7 per cent to close at N7.50 per share from N4.50 per share, followed by Cement Company of Northern Nigeria, CCNN, which surged by 94 per cent to close at N9.70 per share, while FBNH gained 90.45 per cent to close at N6.38 per share from N3.35 per share.

Top five stock price losers’ movement

On the other hand, Forte Oil led the bunch of losers, dropping by 40.7 per cent to close at N50.7 per share from N84.43 per share; it was followed by 7up Bottling Company Plc, which declined by 33 per cent to close at N86.45 per share from N129.00 per share. Meyer Plc dipped by 19.5 per cent to close at N0.70 per share from N0.87 per share; followed by Trans-Nationwide Express Plc, which nosedived by 17 per cent to N0.83 per share to close at N1.00 per share, while Tripple Gee Plc lost 16.2 per cent to close at N1.14 per share from N1.36 per share.

Market Operators/Analysts reactions

Commenting on the market performance, Managing Director/CEO, APT Securities & Funds Limited, Mallam Kasimu Kurfi, said “Second quarter performance is excellent with a gain of over 30 per cent in the three months; this is really exceptional. It is the longest ever gain that we achieved in a quarter.

For the Q3 performance, it will really depend on the global price of Crude oil, as it currently trade at $46, which is seventh months lowest. The ability of the Central Bank of Nigeria, CBN to continue with Foreign Exchange, FX policy, the performance of the companies for second quarter 2017, the behaviour of foreign investor as regard to our market as well as our institutional investors particularly Pension Fund Administrators, will determine the success of Q3.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

CRC Credit Bureau Celebrates 15 Years with Record 14% Credit Penetration in Nigeria

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CRC Credit Bureau Limited celebrated its 15th anniversary with a record 14% credit penetration rate.

The occasion was marked with the CRC Finance and Credit Conference 2024 held in Lagos, where key industry stakeholders gathered to reflect on the bureau’s journey and discuss future trends in credit risk management.

Founded in January 2010 and licensed by the Central Bank of Nigeria (CBN), CRC Credit Bureau has played a pivotal role in enhancing access to credit across Nigeria.

Dr. Tunde Popoola, the Group Managing Director/CEO of CRC Credit Bureau Limited, highlighted the bureau’s journey, noting that from its inception with a single product, CRC has expanded its offerings to 18 products covering all aspects of the lending value chain.

Speaking at the conference, Dr. Popoola underscored the bureau’s contribution to Nigeria’s financial sector, stating, “CRC Credit Bureau has been instrumental in transforming access to credit in Nigeria over the past 15 years. We started with a vision to simplify credit access through reliable data and have since grown to serve millions of Nigerians.”

The event focused on the theme “Sustainable Financing Options: Innovations in Credit Risk Management,” emphasizing the importance of sustainable finance amid economic challenges.

The conference provided a platform for stakeholders to discuss strategies for mitigating risks and enhancing the efficiency of credit operations in Nigeria.

Reflecting on the current state of credit penetration, Dr. Popoola noted that while Nigeria has made significant progress, the 14% penetration rate still falls below global benchmarks.

He highlighted that CRC Credit Bureau currently holds credit scores for 33 million Nigerians, facilitating over 29.4 million searches in 2023 alone, with an additional 10 million searches conducted in the first quarter of 2024.

Joel Owoade, Chairman of CRC’s Board of Directors, acknowledged the economic headwinds impacting businesses in Nigeria but stressed the importance of sustainable financing to mitigate risks associated with lending.

“As we navigate economic fluctuations, sustainable financing remains crucial to fostering economic stability and growth,” Owoade remarked.

The conference also featured insights from industry experts on leveraging artificial intelligence (AI) in credit risk management and regulatory frameworks to support AI-driven innovations.

Olaniyi Yusuf, Managing Partner of Verraki, highlighted the potential of AI to create jobs and enhance economic productivity, calling for supportive regulatory environments that balance innovation with risk management.

Representatives from the Central Bank of Nigeria (CBN) emphasized the regulator’s efforts to promote sustainable credit practices.

Dr. Adetona Adedeji, Acting Director of the Banking Supervision Department at CBN, outlined initiatives such as the National Collateral Registry and Global Standing Instruction aimed at enhancing credit access while minimizing risks.

As CRC Credit Bureau looks ahead, Dr. Popoola expressed optimism about the future, stating, “We remain committed to driving greater financial inclusion and expanding credit access in Nigeria. Our focus is on leveraging technology and strategic partnerships to deliver innovative solutions that meet the evolving needs of consumers and lenders.”

The celebration of CRC Credit Bureau’s 15th anniversary underscored its pivotal role in Nigeria’s financial sector, marking a milestone in the nation’s journey towards broader financial inclusion and sustainable economic growth.

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Loans

Nigeria’s Public Debt Hits N101tn as World Bank Loans Soar to $4.95bn

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Nigeria’s public debt has breached the N101 trillion mark, driven by a substantial influx of loans from the World Bank totaling $4.95 billion over the past twelve months.

This surge in borrowing has raised concerns about the country’s ability to service its growing debt obligations amidst economic challenges exacerbated by the COVID-19 pandemic and fluctuating global oil prices.

As of December 2023, Nigeria’s debt stood at approximately N97 trillion, according to data from the Debt Management Office (DMO).

The recent borrowing spree has propelled this figure to N101 trillion, reflecting a rapid escalation in the country’s indebtedness.

The loans from the World Bank are earmarked for various developmental projects, including critical sectors such as power, women empowerment, education, renewable energy, and economic reforms.

These initiatives are part of Nigeria’s broader strategy to enhance infrastructure, socio-economic development, and institutional reforms aimed at bolstering long-term growth and resilience.

The breakdown of the World Bank funding includes $750 million allocated for power sector financing aimed at improving electricity generation and distribution, which remains a persistent challenge in Nigeria.

Another $500 million is dedicated to women’s empowerment programs, focusing on expanding opportunities and economic inclusion for women across the country.

Also, $700 million has been allocated to support education initiatives, particularly for adolescent girls under the Adolescent Girls Initiative for Learning and Empowerment project.

This funding seeks to enhance access to quality education and empower young girls in Nigeria.

Moreover, the World Bank has committed $750 million to the Distributed Access through Renewable Energy Scale-up project, aimed at increasing electricity access through renewable energy solutions.

This initiative targets over 17.5 million Nigerians who currently lack reliable electricity.

The largest tranche of $1.5 billion is designated for Economic Stabilisation to Enable Transformation Development Policy Financing Programme. This funding is intended to bolster fiscal revenues, expand social safety nets, and support economic diversification efforts to reduce dependency on oil revenues.

Despite these investments aimed at driving economic growth and improving living standards, concerns linger over Nigeria’s ability to effectively manage its escalating debt burden.

The country’s debt servicing costs have risen significantly, diverting resources away from critical sectors such as healthcare, education, and infrastructure development.

Critics argue that while external financing is necessary for development, the government must ensure transparency, accountability, and effective utilization of borrowed funds to avoid the pitfalls of previous debt mismanagement.

There is also a growing call for stringent fiscal discipline and reforms to enhance revenue generation and reduce dependency on borrowing.

President Muhammadu Buhari’s administration has defended the borrowing, asserting that it is crucial for bridging infrastructure gaps, stimulating economic growth, and creating job opportunities.

However, stakeholders emphasize the need for prudent debt management and sustainable economic policies to safeguard Nigeria’s financial stability and long-term prosperity.

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Insurance

Sanlam to Acquire 60% Stake in MultiChoice’s Insurance Arm for R1.2bn

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South African insurance giant Sanlam Limited has announced plans to acquire a 60% stake in NMS Insurance Services (NMSIS), the insurance subsidiary of pay TV operator MultiChoice Group, for R1.2 billion.

This strategic acquisition aims to enhance Sanlam’s footprint in the African insurance market and leverage MultiChoice’s extensive subscriber base across the continent.

In a joint statement released on Tuesday, both companies revealed that the deal includes a long-term commercial arrangement designed to expand insurance and related financial services to MultiChoice’s diverse audience.

The transaction also features a performance-based cash earn-out potential of up to R1.5 billion, contingent upon the gross written premium generated by NMSIS by the end of 2026.

Paul Hanratty, CEO of Sanlam Group, expressed optimism about the acquisition, stating, “This partnership provides a unique opportunity to combine our market presence and technological capabilities, fostering growth and market penetration while creating synergies beneficial to all stakeholders.”

Calvo Mawela, CEO of MultiChoice, highlighted the strategic significance of the collaboration, noting, “This deal not only enhances the value we provide to our subscribers but also taps into Sanlam’s expertise to drive innovation and growth in our insurance offerings across Africa. It’s a testament to the hard work and dedication of our teams.”

NMSIS has shown impressive growth, with gross written premiums increasing by 36% year-on-year and profit after tax rising by 51% in the first quarter of 2024.

MultiChoice plans to use the proceeds from the sale for working capital while retaining a 40% interest in NMSIS.

The move comes as MultiChoice faces economic challenges, including a 13% drop in subscribers in key markets such as Nigeria, Angola, Kenya, and Zambia due to economic hardships and currency devaluations.

Despite these setbacks, the partnership with Sanlam is seen as a strategic step to bolster its financial services offerings and stabilize revenue streams.

The announcement also follows recent regulatory developments, with MultiChoice entering a Cooperation Agreement with Groupe Canal+ SA after Canal+ acquired a 45.20% stake in MultiChoice, necessitating a mandatory offer under South African takeover regulations.

As the African insurance market continues to grow, Sanlam’s acquisition of a significant stake in NMSIS positions both companies to capitalize on emerging opportunities, providing innovative insurance solutions to millions of customers across the continent.

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