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Interbank Rates Fall on Matured Treasury Bills

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  • Interbank Rates Fall on Matured Treasury Bills

Nigeria’s interbank overnight lending rate fell sharply on Friday to an average of 12 per cent from around 60 percent a week ago after the central bank repaid matured treasury bills and a refund of excess cash deposited by banks to buy dollars.

The central bank sold $100 million at its special intervention auction in the foreign exchange market on Tuesday, which was less than the amount requested by banks, leading to a refund of the excess deposited by banks on Friday, Reuters disclosed.

The regulator also injected about N168 billion in matured open market operation (OMO) treasury bills into the system on Thursday, raising money market liquidity levels.

“The interbank rate is seen climbing again next week as the central bank resumes its aggressive liquidity mop up and sustains its intervention in the forex market,” a currency trader said.

The overnight lending rate jumped last week to as high as 100 percent intraday after the central bank tightened liquidity to support the naira currency.

The central bank has consistently issued OMO treasury bills to reduce excess liquidity in the money market and curb speculation on the local currency.

It sold a total of N68.79 billion worth of treasury bills on Friday in its bid to further tighten liquidity in the banking system. The bank’s sales on Friday amounted to N65.5 billion of 363-day open OMO treasury bills at 18.55 percent, and 3.29 million naira of the 174-day paper at 17.95 percent.

On the other hand, a report by Cowry Asset Management Limited showed that the NITTY moved in mixed directions across the maturities– yields on the 1month and 3 months maturities rose to 17.77% from (14.41%) and 19.45% (from 19.43%) respectively. However, 6 months and 12 months yield fell to 19.79% (from 20.36%) and 22.13% (from 22.30%) respectively.

“This week, we expect maturities via secondary market worth N14.65 billion viz: 167-day bills worth N7.976 billion and 168-day bills worth N6.674 billion. We expect further financial system liquidity ease and stability in interbank rates,” the investment firm added.

Forex Transactions

Meanwhile, the local currency remained stable week-on-week on the interbank segment amid CBN’s intervention of $364 million into the interbank foreign exchange market from which the Retail Secondary Market Intervention Sales (SMIS) received $264.19 million while $100 millon was allocated to authorised dealers in the wholesale window.

According to analysts at Cowry Asset Management Limited, the naira also strengthened at the Investors & Exporters Forex Window (I&E) to N361/$.

However, it depreciated at the Bureau De Change and Parallel market segments by 0.27 per cent each to N365/$ and N368/$ respectively.

“Dated forward contracts at the interbank OTC segment suggests likely appreciation of the naira amid an increase in the foreign exchange reserves – external reserves increased week-to-date by 1.06 per cent to $31.55 billion as at Thursday, August 17, 2017. The 3 months, 6 months and 12 months forward contracts appreciated week-on-week by 1.37 per cent, 1.29 per cent and 2.09 per cent, to N379.04/$, N400.18/$ and N438.59/$ respectively,” Cowry Asset Management added in a note at the weekend.

However, the spot rate of the naira depreciated slightly week-on-week by 0.03 per cent, to N305.65/$”.

“In the coming week, we expect further stability of the naira/dollar exchange rate amid consistent build up in external reserves and continued CBN intervention in the interbank segment.”

Bond Market

In the just concluded week, prices of FGN bonds traded at the OTC segment moved in mixed directions – the 20-year, 10% FGN JUL 2030 paper and the 10-year, 16.39% FGN JAN 2022 debt depreciated w-o-w by N0.44 and N0.06 respectively; corresponding yield rose to 16.47% (from 16.35%) and 16.38% (from 16.36%). However, w-o-w the 7-year, 16.00% FGN JUN 2019 and 5-year, 14.50% FGN JUL 2021 appreciated by N0.14 and N0.42 respectively as their yields fell to 16.80% (from 16.89%) and 16.41% (from 16.57%).

Elsewhere, FGN Eurobonds traded on the London Stock Exchange appreciated in value across all the maturities amid renewed bargain hunting. The 10-year, 6.38% JUL 12, 2023 and 5-year, 5.13% JUL 12, 2018 bonds appreciated by USD0.80 (yield fell to 5.53%) and USD0.20 (yield fell to 3.58%) respectively.

But, this week, the Debt Management Office (DMO) will auction bonds worth N135 billion, viz: the 5-year, 14.50% FGN JUL 2021 worth N35 billion, 10-year, 16.2884% FGN MAR 2027 worth N50 billion and 20-year, 16.2499% FGN APR 2037 worth N50 billion.

“We expect bond prices to appreciate at the OTC market on the back of expected ease in financial system liquidity.”

As part of efforts to further strengthen the value of the Naira on the parallel market segment of the foreign exchange (forex) market, the Central Bank of Nigeria (CBN) has directed that payments for port charges to the Nigerian Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) by oil marketing companies should henceforth be accommodated in the official forex window.

Easing Dollar Access to Maritime Operators

As part of efforts to further strengthen the value of the Naira on the parallel market segment of the forex market, the CBN last week directed that payments for port charges to the Nigerian Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) by oil marketing companies should henceforth be accommodated in the official forex window.

The central bank issued the directive Tuesday in a circular titled, “Payment of Ports and Nigerian Maritime Administration and Safety Agency Charges by Oil Marketing Companies,” signed by its Director, Trade and Exchange Department, Mr. W.D. Gotring, a copy of which was obtained by THISDAY. CBN explained that the initiative would help improve forex availability in the market, as well as address the challenges encountered by stakeholders in the maritime sector.

The two-paragraph circular stated: “In the continued effort to improve forex availability in the Nigerian forex market and ameliorate challenges encountered by critical stakeholders, payment for port charges to the NPA, NIMASA, etc, by oil marketing companies can now be accommodated by the CBN using Form ‘A’.

“Therefore, authorised dealers are directed to accept the request for payment of port charges from oil marketing companies and forward same to the CBN forex window.”

National Corruption Report

An estimated N400 billion, or the equivalent of $4.6 billion in purchasing power parity (PPP), representing 39 per cent of the combined federal and state education budgets in 2016, is paid out as bribes to public officials in Nigeria annually, a new report released by the National Bureau of Statistics (NBS), in collaboration with the United Nations Office on Drugs and Crime (UNODC), revealed last week

The National Corruption Report, which covered the period between June 2015 and May 2016 also showed that almost a third of Nigerian adults (32.3 per cent) who had contact with public officials between June 2015 and May 2016 had to pay, or were requested to pay a bribe to such public officials. According to the report, the magnitude of public sector bribes in Nigeria becomes even more palpable when factoring in the frequency of the payments, adding that the majority of those who paid bribes to public officials did so more than once over the course of the year. Bribe-payers, it added, pay an average of some six bribes in one year, or roughly one bribe every two months.

“Roughly 400 billion Nigerian Naira is spent on bribes each year. Taking into account the fact that nine out of every ten bribes paid to public officials in Nigeria are paid in cash and the size of the payments made, it is estimated that the total amount of bribes paid to public officials in Nigeria in the 12 months prior to the survey was around 400 billion Nigerian Naira (NGN), the equivalent of $4.6 billion in purchasing power parity (PPP). This sum is equivalent to 39 per cent of the combined federal and state education budgets in 2016,” the report said.

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.

Banking Sector

Peter Obaseki Retires as Chief Operating Officer of FCMB Group Plc

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The Board of Directors of FCMB Group Plc has announced the retirement of Mr. Peter Obaseki, the Chief Operating Officer of the financial institution, with effect from March 1, 2021. He was also an Executive Director of the Group.

His retirement was approved at a meeting of the Board of the Group on February 26, 2021. This has also been announced in a statement to the Nigerian Stock Exchange (NSE) by the financial institution.

The Chairman of FCMB Group Plc’s Board of Directors, Mr Oladipupo Jadesimi, thanked Mr. Obaseki for his valuable service and excellent support to the Board for many years.

FCMB Group Plc is a holding company divided along three business Groups; Commercial and Retail Banking (First City Monument Bank Limited, Credit Direct Limited, FCMB (UK) Limited and FCMB Microfinance Bank Limited); Investment Banking (FCMB Capital Markets Limited and CSL Stockbrokers Limited); as well as Asset & Wealth Management (FCMB Pensions Limited, FCMB Asset Management Limited and FCMB Trustees Limited).

The Group and its subsidiaries are leaders in their respective segments with strong fundamentals.

For more information about FCMB Group Plc, please visit www.fcmbgroup.com.

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Banking Sector

COVID-19: CBN Extends Loan Repayment by Another One Year

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Central Bank Extends One-Year Moratorium by 12 Months

The Central Bank of Nigeria (CBN) has extended the repayment of its discounted interest rate on intervention facility by another one-year following the expiration of the first 12 months moratorium approved on March 1, 2020.

The apex bank stated in a circular titled ‘Re: Regulatory forbearance for the restructuring of credit facilities of other financial institutions impacted by COVID-19’ and released on Wednesday to all financial institutions.

In the circular signed by Kelvin Amugo, the Director, Financial Policy and Regulation Department, CBN, the apex bank said the role-over of the moratorium on the facilities would be considered on a case by case basis.

The circular read, “The Central Bank of Nigeria reduced the interest rates on the CBN intervention facilities from nine per cent to five per cent per annum for one year effective March 1, 2020, as part of measures to mitigate the negative impact of COVID-19 pandemic on the Nigerian economy.

“Credit facilities, availed through participating banks and OFIs, were also granted a one-year moratorium on all principal payments with effect from March 1, 2020.

“Following the expiration of the above timelines, the CBN hereby approves as follows:

“The extension by another 12 months to February 28, 2022 of the discounted interest rate for the CBN intervention facilities.

“The role-over of the moratorium on the above facilities shall be considered on a case by case basis.”

It would be recalled that the apex bank reduced the interest rate on its intervention facility from nine percent to five percent and approved a 12-month moratorium in March 2020 to ease the negative impact of COVID-19 on businesses.

To further deepen economic recovery and stimulate growth, the apex bank has extended the one year-moratorium until February 28, 2022.

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Finance

MTN Nigeria Generates N1.35 Trillion in Revenue in 2020

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MTN Nigeria Grows Revenue by 15.1 Percent from N1.169 Trillion in 2019 to N1.35 Trillion in 2020

Despite the COVID-19 pandemic and challenging business environment, MTN Nigeria realised N1.346 trillion in revenue in the financial year ended December 31, 2020.

The leading telecommunications giant grew revenue by 15.1 percent from N1.169 trillion posted in the same period of 2019.

Operating profit surprisingly jumped by 8.5 percent from N393.225 billion in 2019 to N426.713 billion in 2020.

This, the telecom giant attributed to the surge in finance costs due to increased borrowings from N413 billion in 2019 to N521 billion in 2020.

MTN Nigeria further stated that the increase in finance costs was the reason for the decline in growth of profit before tax to 2.6 percent.

MTN Nigeria grew profit before tax by 2.6 percent to N298.874 billion, up from N291.277 billion filed in the corresponding period of 2019.

The company posted N205.214 billion profit for the year, a 0.9 percent increase from N203.283 billion recorded in the 2019 financial year.

Share capital remained unchanged at N407 million. While Total equity increased by 22.3 percent from N145.857 billion in 2019 to N178.386 billion in 2020.

MTN Nigeria’s market price per share increased by 61.8 percent from N105 to N169.90.

While market capitalisation as at year-end also expanded by 61.8 percent to N3.458 trillion, up from N2.137 trillion.

The number of shares issued and fully paid as at year-end stood at 20.354 million.

MTN Nigeria margins were affected by Naira devaluations and capital expenditure due to the new 4G network coverage roll-out.

Margins were adversely affected by the effect of naira devaluation and expenses associated with new sites’ roll-out to boost 4G network coverage in FY’20.

“On the former, we note that MTNN expanded the scope of its service agreement with IHS Holding Limited and changed the reference rate for converting USD tower expenses to NAFEX (vs CBN’s official rate previously). Thus, over the full-year period, the company’s operating margin contracted by 1.9 ppts YoY to 31.7%,” CardinalStone stated in its latest report.

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