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Bond Prices Fall on Profit-taking over Fears of Rate Cut



  • Bond Prices Fall on Profit-taking over Fears of Rate Cut

The prices of FGN bonds traded on the over-the-counter (OTC) segment fell for most maturities last week, amid renewed profit-taking as investors cash in on recent gains.

There are also projections that an interest rate cut by the Central Bank of Nigeria (CBN) may be in the offing in the short-term.

According to a report by Cowry Asset Management Limited, the 20-year, 10% FGN JUL 2030 paper, the 7-year, 16.00% FGN JUN 2019 and 5-year, 14.50% FGN JUL 2021 debts, all depreciated week-on-week by N0.50, N0.13 and N0.24 respectively; while corresponding yields rose to 16.61% (from 16.47%), 16.89% (from 16.80%) and 16.51% (from 16.41%). However, the 10-year, 16.39% FGN JAN 2022 debt, remained unchanged.

On the other hand, FGN Eurobonds traded on the London Stock Exchange appreciated in value across all the maturities amid sustained bargain hunting. The 10-year, 6.38% JUL 12, 2023 and 5-year, 5.13% JUL 12, 2018 bonds appreciated by $0.69 (yield fell to 5.39%) and $0.05 (yield fell to 3.49%) respectively.

“This week, we expect bond prices to appreciate at the OTC market on the back of expected ease in financial system liquidity,” Cowry Asset Management predicted.

But in their own assessment of the performance of the bond market last week, analysts at Afrinvest West Africa Limited, pointed out that in line with the recent trend in the domestic bond market, investor interest stayed soft last week and performance was largely bearish as average yield across benchmark bonds trended northwards on four of five trading sessions.

Last Wednesday, the Debt Management Office offered N35 billion of the JUL 2021 (Subscription: N10.4 billion, Allotted: N9.2 billion), N50 billion of the MAR 2027 (Subscription: N19.9 billion, Allotted: N17.5 billion) and N50 billion of the APR 2037 (Subscription: N33.4 billion, Allotted: N29.4 billion) instruments at marginal rates of 16.8%, 16.8% and 16.9% respectively. “Unsurprisingly, all Instruments were undersubscribed as lower system liquidity as well as investor preference for higher yield but short tenored treasury bills and open market operations (OMO) bills weighed on investor appetite at the Primary Market Auction.

The Lagos-based investment bank showed that sentiment on African Eurobonds was largely bullish last week as prices rose and yields fell on all trading instruments under our coverage, save for the Ghana 2017(+49 basis points), Ghana 2024 (+5 basis points) and South Africa 2019 (+2 basis points) instruments. The Gabon and Zambia Eurobonds received the most interest as average yield on respective country bonds declined 40 basis points and 16 basis points respectively week-on-week.

But the Kenya 2024, Zambia 2024 and Nigeria 2023 Eurobonds remained the best performing among their peers with year-to-date return of 10.3%, 8.8% and 8.5% respectively.

However, performance of Nigerian Corporate Eurobonds was mixed but largely bullish as investors were bearish on FBN Holdings’ 2021 (up 2 basis points) and Diamond 2019 (up 71 basis points).

Also, the Zenith 2022 (-34 basis points) received the most buying interest followed by the Access 2021(-4 basis points), FBN Holdings 2020 (-11 basis points) as well as the UBA 2022 (-6 basis points).

“Relatedly, Access and UBA released largely impressive H1:2017 results during the week and we believe this could have driven interest in the banks’ Eurobonds.

“On a year-to-date basis, Diamond 2019 (+21.3%) remains the best performing on price basis followed by FBN Holdings 2021 (+19.1%) and Fidelity 2018 (+13.8%),” according to the Afrinvest report.

Interbank Market

During the week, money market rates moved in tandem with liquidity dynamics. The CBN conducted OMO auctions on all trading sessions of the week while the DMO held its monthly bond auction which squeezed N56.1 billion from the system.

As a result, money market rates – open buy back (OBB) and overnight – rose on four of five sessions while system liquidity remained in deficit all week despite FAAC inflow and maturing OMO bills repayment of N652.23 billion and N95.7 billion respectively.

At the start of the week, OBB and overnight rates stood at 18.0% and 18.6% respectively and further rose to 24.2% and 25.2% on Tuesday due to a larger system deficit of N78.6 billion against N59.7 billion on Monday.

Liquidity levels further deteriorated on Wednesday to a deficit of N221.5 billion due to a series of outflows (debits from the bond and OMO sales). Consequently, Afrinvest in the report, showed that OBB and overnight rate spiked 67.5 and 70.8 percentage points to 91.7% and 96.0% respectively.

However, rates moderated on Thursday to 9.5% (OBB) and 10.1% (overnight), owing to OMO maturity of N95.7 billion which more than offset the N58.3 billion debit in OMO sales, although system liquidity remained in a deficit.

At the close of week, OBB closed flat at 12.0% week-on-week whilst overnight rate slid 30 basis points to 12.6% week-on-week.

However, performance in the treasury bills market was mixed last week as average treasury bills rate across benchmark instruments closed higher in three of five sessions.

The week started off on a quiet note, as average yield at the end of trade closed four basis points lower to settle at 18.5% while rates further declined two basis points on Tuesday to 18.4%. By Wednesday, average treasury bills rates inched a marginal one basis point higher to 18.5% and remained flat on Thursday. Average yield however closed the week at 18.5%, indicating a marginal four basis points hike week-on-week. This week, there will be an OMO maturity of N101.2 billion.

Analysts at Afrinvest anticipated that the CBN would continue with its OMO mop-ups in order to guide interbank rates to target levels.

Forex Market

In the just concluded week, the CBN injected $195million into the interbank foreign exchange market. In the wholesale segment of the market of the interbank market, CBN auctioned $100 million, $50 million went to the small and medium enterprises (SMEs) and the invisibles segment received $45 million.

Despite the inflows, the naira depreciated week-on-week (w-o-w) at the interbank and Bureau De Change market segments by 3.13 per cent and 0.27 per cent to N330/$ and N367/$ respectively.

However, the naira strengthened at the Investors & Exporters Forex Window (I&E FXW) by N0.42 to N359.56/$. At the parallel market, the local currency remained stable week-on-week.

Dated forward contracts at the interbank OTC segment suggested likely appreciation of the naira amid relatively high foreign exchange reserves – external reserves stood at $31.55 billion as at Friday, August 18, 2017.

The spot and 3 months forward contracts depreciated week-on-week by 0.03 per cent and 0.23 per cent to N305.80/$ N378.44/$ respectively.

The six months and 12 months however appreciated week-on-week by 0.03 per cent and 0.01 per cent to N398.52/$ and N435.63/$.

“This week, we expect CBN’s continued intervention in the interbank segment, increasing investor confidence and consistent build-up in external reserves to lead to further stability of the naira/dollar exchange rate,” analysts at Cowry Asset Management stated.

Liquidity for Non-interest Instruments

In a bid to aid liquidity management and deepen the financial system, the Central Bank of Nigeria last week introduced two new financial instruments known as – Funding for Liquidity Facility (FfLF) and Intra-day Facility (IDF), at its window, for access by non-interest financial institutions (NIFIs) under its regulation.

This central bank listed some of the features of the FfLF to include that it would provide liquidity facility on overnight basis only and to be terminated on next business day.

Some other features include: “Authorised non-interest financial institutions to provide eligible securities to the CBN as collateral for the facility. The value of the collateral to be maximum of 110 per cent of the value of the facility. For example, if a NIFI wishes to take a FfLF of N10 billion, it would be required to provide eligible security collateral worth N11 billion.

“The CBN shall specify acceptable collaterals from time to time. These shall include, but not limited to the following securities: CBN safe custody account (CSCA) deposit, CBN non-interest note (CNIN), CBN Asset-backed security (CBN-ABS). Sukuk (that has received status from the CBN, warehouse receipts as provided in the CBN Act 2007, and any other collateral designated by the CBN that does not contravene the CBN guidelines for NIFI’s operations,” it explained.

On the other hand, it listed some of the features of the IDF to include that the CBN would provide an IDF for settlement, on same day business while authorised NIFI are expected to provide eligible securities as collateral for the facility.

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

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Nigeria’s Public Debt Hits ₦121.67 Trillion as Borrowings Surge – DMO



The Debt Management Office (DMO) of Nigeria has announced that the country’s total public debt has risen to ₦121.67 trillion ($91.46 billion) as of March 31, 2024.

This represents an increase of ₦24.33 trillion from the ₦97.34 trillion ($108.23 billion) recorded at the end of December 2023.

The surge in debt is attributed to both domestic and external borrowings by the Federal Government, the 36 state governments, and the Federal Capital Territory (FCT).

The DMO’s report reveals that Nigeria’s domestic debt now stands at ₦65.65 trillion ($46.29 billion), while the external debt is ₦56.02 trillion ($42.12 billion).

The DMO noted that the rapid increase in public debt is largely due to new borrowing to partially finance the 2024 Budget deficit and the securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria (CBN).

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria,” the DMO stated.

Despite the rising debt, the DMO remains optimistic about future debt sustainability, contingent on improvements in government revenue.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the Government’s Revenue to enhance debt sustainability,” the DMO added.

The increase in debt comes at a time when President Bola Tinubu is preparing to present the 2024 Supplementary Budget to the National Assembly.

This follows the President’s approval of the ₦28.7 trillion 2024 Appropriation Bill on January 1, 2024, which was ₦1.2 trillion higher than the budget originally proposed in November 2023.

The 2024 budget, dubbed the “Budget of Renewed Hope,” set ambitious targets, including pegging the oil price at $77.96 per barrel and estimating daily oil production at 1.78 million barrels.

However, the naira has faced severe depreciation, plunging to nearly ₦2,000/$1 in February, before stabilizing around ₦1,500/$1.

Economic analysts warn that the escalating debt and currency depreciation could pose significant challenges to Nigeria’s economic stability.

The government’s ability to manage its borrowing and stimulate revenue generation will be critical in navigating these fiscal pressures.

As Nigeria grapples with these economic realities, the focus remains on finding sustainable solutions to manage the growing debt burden while fostering economic growth and stability.

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Banking Sector

Federal High Court Sets Date for Contempt Hearing in GTB vs. AFEX Loan Case



The Federal High Court in Lagos has scheduled June 27, 2024, for the next hearing in the ongoing contempt suit filed by Guaranty Trust Bank Plc (GTB) against directors of AFEX Exchange Commodities Limited.

The case revolves around a disputed N17.81 billion loan obtained under the Central Bank of Nigeria’s Anchor Borrowers’ Programme.

Presiding over the court, Justice Chukwujekwu Aneke set the date following a session where arguments were presented by the plaintiff’s lead counsel, Mr. Ade Adedeji (SAN), and the respondent’s counsel, Prof. Olawoyin (SAN).

The core issue pertains to the alleged disobedience of a court order by the directors of AFEX Exchange Commodities Limited.

GTB, through its counsel Ajibola Aribisala (SAN), has accused AFEX and its directors—Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi—of contempt for failing to comply with a court directive.

The bank alleges that these directors did not appear in court as mandated, which led to the initiation of contempt proceedings.

During the latest session, Adedeji emphasized the necessity for the directors to appear in person, stating, “My lord, the parties in contempt are not in court. The contemnors cannot sit in the comfort of their homes and send a lawyer to court in contempt proceedings. The law is trite that they must appear before the court.”

In response, Olawoyin argued that he had only recently been briefed on the matter and was not fully aware of the prior developments.

He noted that some of the individuals listed as directors were no longer with the company, adding that one current director, Mr. Akinyinka, was present in court, while another was on pilgrimage.

The contempt case traces back to a suit marked FHC/L/CS/911/2024, where GTB sought to recover the loan amount through legal measures.

On May 27, Justice Aneke granted an interim Global Standing Instruction (GSI) injunction, which directs over 20 banks to transfer funds credited to AFEX into its account with GTB until the debt is settled.

Also, the court authorized GTB to take possession of AFEX’s 16 warehouses across seven states and sell the commodities stored within, as these were procured using the CBN’s loan facility.

The N17.81 billion loan comprises N15.77 billion in principal and interest outstanding as of April 17, 2024, and an additional N2.04 billion covering recovery costs and incidental expenses.

As the court prepares for the next hearing, the financial and legal communities are closely watching the proceedings.

The outcome will significantly impact not only the involved parties but also set a precedent for handling similar cases in the future.

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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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