- NSE Identifies Risk Elements of Derivatives, CCP Transactions
For derivatives and Central Counterparty Clearing transactions, the Nigerian Stock Exchange has said products may be used to hedge a countless array of risks, such as interest rates, equities, agricultural, energy, credit, currency, among others.
The products and participants, it said, were potentially subject to multiple federal, state, and foreign laws based on the nature of the enterprise, product and transaction.
The General Counsel and Head of Regulation NSE, Miss Tinuade Awe, said this in a her keynote address at a training on legal and the risk aspects of derivatives and CCP trasanction organised by the Exchange on Monday in Lagos.
She said the imperatives for a truly functional derivatives market were safety, effective risk mitigation, innovation and efficiency.
“Risks, such as counter party risks, operational risks, liquidity risks, systemic and legal risks could be implicit in even the most developed markets. The financial global market was shaken to its very foundation in the wake of the global financial crisis between 2007 and 2010 when it became apparent that the underlying assets securing collaterised mortgages had suddenly become delinquent,” Tinuade hinted.
She explained that collateralised debt obligation, which are securities whose value is collaterised (backed) by a pool of underlying fixed-income assets, gave way to complex synthetic financial structures, which were understood by very few financial experts in the industry.
The peak of the financial crisis in 2008, according to her, crippled some of the world’s most dynamic financial institutions, as banks found themselves tied up in trillion dollars worthless assets. Of this, around half ($500bn), was tied up in CDOs. With many banks sitting on huge losses, the interbank lending market dried up, as no bank wanted to lend to another bank that was potentially “going bust”.
Awe said, “We believe that in Nigeria, the Exchange-Traded Fund initiative will eventually develop into a robust market place that can support our growth ambitions as a nation, using South Africa as an example of Africa’s first derivative market. South Africa’s derivatives market has grown rapidly in recent years, which has supported capital inflows and helped market participants to price, unbundle and transfer risk.
“The concept of derivatives remains relatively novel in the Nigerian financial market space and has only been noticeable within the Over-The-Counter segment of the market. The frontiers of the Nigerian financial market is expected to grow exponentially due to enhanced liquidity arising from the development of new and intricate financial instruments.
“Given the open and transparent financial market place the NSE offers to a wide range of domestic and international investors, it is expected that all participants must have the commensurate capacity and knowledge-base to deal with the intricacies and the sometimes esoteric features of derivatives.
“Given the derivatives market’s global nature, users can trade around the clock and make use of derivatives that offer exposure to almost any ‘underlying’ asset class across various global markets. The derivatives market is predominantly a professional wholesale market with individuals, corporations, institutions and governments as its main participants. A single derivatives transaction may attract diverse levels of professional financial counterparts across the value chain.”
Peter Obaseki Retires as Chief Operating Officer of FCMB Group Plc
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.
COVID-19: CBN Extends Loan Repayment by Another One Year
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.
MTN Nigeria Generates N1.35 Trillion in Revenue in 2020
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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