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Stocks: CBN Special Forex Window Attracts N2.715tn Investments

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  • CBN Special Forex Window Attracts N2.715tn Investments

The Nigerian equities market has attracted N2.715tn investments owing to the foreign exchange window for investors and exporters introduced by the Central Bank of Nigeria on April 21 this year.

Stocks have seen a huge rally across board evident in the soaring Nigerian Stock Exchange market capitalisation of listed equities, the All-Share Index, number of deals, as well volumes traded vis-a-vis their values.

The NSE market capitalisation has appreciated by 31.04 per cent between April 20 (last trading day before the window’s opening) and July 14 (latest trading day), from N8.748tn to N11.463tn.

In the same vein, the All-Share Index, volumes traded, deals and value of transactions as of April 20 were 25,282.75 basis points, 147.887 million, 2,578 and N836.842m, respectively.

While as of July 14, the respective figures had risen to 33,261.66 basis points, 311.608 million, 3,113 and N3.27bn.

The special forex window tagged, ‘Investors and Exporters FX Window’, according to the apex bank, will boost liquidity in the forex market and ensure timely execution and settlement of eligible transactions.

Small-scale investors and exporters have always decried the closure of several outfits due to lack of access to foreign exchange to procure necessary facilities to support their operations.

The central bank had earlier opened a special window for Small and Medium Enterprises to facilitate the importation of eligible finished and semi-finished items.

However, the eligible transactions covered under the new window include invisible transactions, such as loan repayments, loan interest payments, dividends/income remittances, capital repatriation, management service fees and consultancy fees.

Also covered by the forex window are software subscription fees, technology transfer agreements, personal home remittances, bills for collection and any other trade-related payment obligations at the instance of the customer.

Other eligible transactions like ‘miscellaneous payments’ detailed under Memorandum 15 of the CBN foreign exchange manual, are also covered under the new window.

Also, transactions and bills for collection are eligible to purchase foreign currencies sourced from the CBN forex window limited to secondary market intervention sales, wholesale (spot and forwards) only.

The only items excluded under the new window are international airlines ticket sales’ remittances, which will only be eligible to access forex at the CBN FX window.

For the apex bank, the supply of dollars to the new window shall be through portfolio investors, exporters, authorised dealers and other parties with foreign currencies to exchange to naira.

The Acting Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, said in a telephone conversation with our correspondent that the introduction of the I & E FX window attracted significant foreign inflows as well as domestic funds to the capital market.

He said, “The mere fact that the foreign investors got more naira for their dollars, at between N305/dollar and N385/dollar, gave the boost.

“The FX liquidity and economic challenges had pushed most stock prices to all-time lows, creating opportunities for significant upside. The stock market has rallied over 23 per cent since the introduction of the new FX window.”

Ebo added that the eventual convergence of the Nigerian Inter-bank Foreign Exchange Fixing to the Nigerian Autonomous Foreign Exchange Rate Fixing would further boost investors’ sentiments.

According to him, the performance of corporates in the half-year period will also shape the market direction.

The Managing Director, Investment One Venture Capital, Dr. Ore Sofekun, told our correspondent that the special FX window of the apex bank was working as some sort of convergence had been seen among FX rates.

She added, “The main thing is that we have some sort of convergence between the official and parallel FX rates.

“We should continue to work towards a common FX window to further boost confidence in the market. However, the situation is getting more market-determined.”

Also, the Vice-President, Equity Sales, Renaissance Capital, Mr. Daniel Ugwuoke, said the adjustment by the CBN had been very positive considering the level of rallying experienced in the capital market.

According to him, the country is headed in the right direction, but not where it should be yet.

Ugwuoke said many foreign investors were still playing the waiting game, given the multiplicity of FX rates in the Nigerian market space like the inter-bank rate, NAFEX, fuel marketers’ rate and the parallel rate.

He explained that the foreign investors were awaiting a single FX rate, adding, “They still believe the naira is over-valued. They don’t leverage on the NAFEX because they feel it lacks transparency, but are using the Inter-bank rate.

“The CBN is expected to unify the rates at this time. It is time for the CBN to do it. By not doing the adjustment now, the CBN is not only deterring investors, but is threatening the country’s Morgan Stanley International Capital standing.”

The MSCI recently increased the weighting assigned to Nigerian stocks to 7.9 per cent from 6.5 per cent previously in its frontier markets’ basket of equities.

The index designed to track and measure stock markets was rebalanced by Morgan Stanley, and the new weightings took immediate effect.

The MSCI Frontier Market Index Nigeria comprises of 16 companies listed on the NSE, including Nigerian Breweries Plc, Guaranty Trust Bank Plc, Zenith Bank Plc, Nestle Nigeria Plc, Dangote Cement Plc, Forte Oil Plc, Seplat Petroleum Development Company Plc and FBN Holdings Plc.

The MSCI report stated that there would not be any specific review changes for any securities in the country in the MSCI Nigeria-specific index or composite index based on the ongoing issues with the forex market.

Meanwhile, Nigeria’s status in the MSCI Frontier Markets Index remains under consideration for a “standalone” re-classification.

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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Finance

ARISE IIP and Africa Finance Corporation Launch US$ 100M Capital Pool for African Entrepreneurs

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ARISE IIP, the pan-African developer and operator of world-class industrial parks, and Africa Finance Corporation (AFC), the leading infrastructure solutions provider in Africa, today announced the signing of a Memorandum of Understanding to establish a dedicated US $100 million capital pool for African entrepreneurs who are establishing operations within any of the Arise IIP Special Economic Zones (SEZ) in Africa. 

At the heart of this partnership is a shared vision to uplift African entrepreneurs by providing them with much needed financing and advisory services to catalyse growth.

AFC will also actively seek financing from Export Credit Agencies (ECAs), local and regional financial institutions to mobilise funding to support these companies.

This concerted effort underscores ARISE IIP and AFC’s commitment to fostering industrialisation, job creation and economic prosperity in Africa.

Under this partnership, AFC’s comprehensive suite of financial services will extend beyond financing to include financial advisory support for corporate finance, equipment financing and market entry including assisting with joint ventures and technical partnerships for sponsors that may require it, to ensure they are well-equipped to seize opportunities and thrive within the SEZs.

By tapping into AFC’s extensive network and expertise, ARISE IIP aims to cultivate a vibrant ecosystem that nurtures entrepreneurship and drives sustainable economic development across the continent.

Gagan Gupta, CEO of ARISE IIP said about this partnership: “ARISE IIP is about empowerment. By empowering our customers, and ensuring they have the robust financial support needed to meet their operational objectives, this collaboration with Africa Finance Corporation, our long-lasting partner, takes us one step closer to realising our vision of an industrialised and prosperous Africa.

Samaila Zubairu, President & CEO of AFC said: This partnership marks a significant milestone in our commitment to offer strategic financial advisory and corporate finance services to firms focused on value capture and import substitution projects in Africa. By collaborating with our investee company Arise IIP and African entrepreneurs in our Special Economic Zones, we aim to foster an ecosystem that will increase trade, create jobs, and drive economic advancement on the continent.

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United Capital Plc Reports Stellar Growth with 65% Profit Increase, Announces Dividends

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United Capital - Investors King

United Capital Plc (NGX: UCAP) has unveiled its unaudited financial results for the period ending June 30, 2024.

The company reported a 38% increase in gross earnings year-on-year to N15.15 billion. Profit before tax soared by 63% to N9.06 billion while profit after tax surged by 65% to N7.74 billion.

Total assets rose by 27% in the first half to N1.19 trillion, and shareholders’ funds increased by 33% to N120.34 billion.

These robust results have prompted United Capital to declare an interim dividend of N0.90 per 50 kobo ordinary share, alongside a generous bonus share offering of “2 for 1.”

Peter Ashade, Group CEO, expressed satisfaction with the strong financial outcomes, highlighting the company’s commitment to creating wealth and delivering superior value to shareholders.

“This marks a historic moment with our first-ever interim dividend and bonus share announcement, demonstrating our dedication to stakeholder value,” Ashade stated.

The company remains confident about sustaining its growth trajectory throughout 2024, bolstered by nearly N1.3 trillion in funds under management.

United Capital continues to prioritize activities that enhance and preserve value for stakeholders, maintaining its competitive edge and profitability.

With a focus on trusts, mutual funds, and professionally managed investments, the group is strategically positioned to achieve its growth objectives, ensuring sustainable returns for all involved.

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Banking Sector

Nigeria Plans 50% Windfall Tax on Banks’ Currency Profits

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Central Bank of Nigeria (CBN)

Nigerian President Bola Tinubu has announced a one-time 50% tax on windfall profits that banks reaped from currency gains following last year’s naira devaluation.

This decision was part of the government’s strategy to navigate the ongoing cost-of-living crisis.

The naira, which has depreciated by about 70% against the dollar since foreign exchange rules were relaxed in June 2023, allowed banks holding dollar assets to significantly boost their income.

However, the Central Bank of Nigeria had advised lenders to retain these profits as a buffer against potential future losses.

The proposed tax will apply to the 2023 financial year, with non-compliance resulting in hefty fines.

The move has already impacted the NGX Banking Index, which fell by 1.3% as of midday trading in Lagos. Notable declines were seen in FBN Holdings Plc and Zenith Bank Plc, dropping 3.2% and 2.5% respectively.

This initiative mirrors similar actions in Europe, where countries like Italy and Hungary have imposed taxes on banks to address what they view as excessive profits during periods of high inflation and interest rates.

European banks have criticized these measures, warning of potential impacts on economic growth due to constrained lending capabilities.

President Tinubu’s administration believes this tax will help manage Nigeria’s fiscal challenges while addressing social needs.

Lawmakers are expected to support the measure, alongside a proposal to increase government spending by 6.2 trillion naira ($3.8 billion).

While banks have benefited from currency revaluations, many customers, particularly manufacturers with dollar-denominated loans, faced significant losses as they struggled with the weaker naira.

The new tax policy highlights the government’s broader efforts to stabilize the economy and attract foreign investment, aiming to ensure a more equitable distribution of financial gains.

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