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Special Forex Window, Others Attract N7.406tn Investments to Stocks

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CEO of the Nigerian Stock Exchange (NSE), Mr
  • Special Forex Window, Others Attract N7.406tn Investments to Stocks

Nine months after the Central Bank of Nigeria introduced the foreign exchange window for investors and exporters, the equities market has witnessed an unprecedented growth by N7.406tn, which has led to the near doubling of the Nigerian Stock Exchange’s market capitalisation.

Between April 21, 2017 (when the new forex window opened) and January 19, 2018 (the latest trading day), the equities market has seen approximately 85 per cent appreciation in terms of investors’ worth, meaning a rise in the NSE equity capitalisation from N8.748tn to N16.154tn.

Stocks have seen a huge rally across board evident in the soaring equity capitalisation of listed equities, the All-Share Index, number of deals, as well volumes traded and their corresponding values.

In the same vein, the All-Share Index, volumes traded, deals and value of transactions as of April 20 last year were 25,282.75 basis points, 147.887 million, 2,578 and N836.842m, respectively, while as of January 19 this year, they had appreciated to 45,092.83 basis points, 1.339 billion, 9,053 and N8.629bn in that order.

In the space of nine months, the volume, value and number of deals had appreciated by over 805 per cent, 600 per cent and 251 per cent, respectively.

The CBN said the special forex window dubbed, ‘Investors and Exporters FX Window’, will boost liquidity in the forex market and ensure timely execution and settlement of eligible transactions.

The Chief Executive Officer, NSE, Mr. Oscar Onyema, while commenting on the progress seen in the market at the close of 2017 and the beginning of this year, attributed the growth in the Nigerian capital market thus far to the improvement in the various macroeconomic variables of the country, while also making a special case for the CBN revised forex market rules.

“We attribute this performance, in part, to the central bank’s monetary policies that resulted in increased liquidity in the foreign exchange market,” Onyema said.

According to the NSE CEO, the current situation in the Nigerian FX front has taken away the fear initially nursed by most capital market investors (both local and foreign) and restores confidence in the financial market, hence the rally.

“Before now, some investors never realised the favourable state of the Nigerian market. But after the gain of 2017 and the massive mention it enjoyed even in the international media, those investors who had not been part of the process deemed it appropriate to come on board,” Onyema explained.

The NSE All Share Index suffered mightily in 2015 and 2016 as currency troubles, low oil prices and militant attacks, among others, hit investor sentiment.

But oil prices have moved higher, the central bank has made it easier to swap currencies and the economy has snapped out of recession, explained Zin Bekkali, founder and Chief Executive Officer of Silk Invest.

Many analysts are optimistic that Nigerian stocks will keep rising in 2018.

“If you look at where we stand today, the Nigerian market is still one of the cheapest markets on the planet,” Bekkali said.

The Chief Economist, Vetiva Capital, Michael Famoroti, noted that there was a need for brave policy action to shift growth beyond first gear, believing that amid a more accommodative global environment, Nigeria should have confidence in boldly pursuing its internal growth agenda.

With the notable improvement in oil production, he said the country could expect to see further consolidation in the Federal Government’s revenues and the foreign exchange market.

With this, Vetiva Research expects the Nigerian economy to grow by two per cent year-on-year in 2018, driven by expansive fiscal and monetary policies, as well as strengthening consumer wallets. It also expects equities to hold the upper hand in comparison to the fixed income space.

“Despite the 2017 equity market rally driven by a partial liberalisation of the country’s exchange rate regime, the NSE remains relatively undervalued,” Vetiva Research stated.

Amidst this, Vetiva projects further gains for the equity market in 2018, with an estimated full year return of 15 per cent to 20 per cent.

The NSE had recovered from the macroeconomic overhang of the commodity down cycle to become the third best performing market in 2017 globally, with a 42 per cent return in the NSE ASI. The equity market activity soared from 2016 levels, as market turnover increased by 121 per cent to N1.27tn from N0.58tn.

Although Initial Public Offer activity in 2017 remained mute, the bourse said there were several other positive indicators, including the revival of supplementary listings and the return of new issuances. The value of supplementary listings increased by 27 per cent, bringing the total value of equity issues in 2017 to N408bn.

As of January 15 this year, Nigerian stocks had risen by 12 per cent already, the most globally among the 96 major bourses tracked by Bloomberg, pushing it to the highest level since 2008.

Dangote Cement Plc, controlled by Africa’s richest man, Aliko Dangote, and the largest company on the exchange, has climbed to a record high.

Analysts say investors are looking to increase their holdings of what remain among the cheapest stocks on the Nigerian bourse.

Amid the positive expectations, HSBC analysts, David Faulkner, John Lomax and Kishore Muktinutalapati, in a note on January 11 this year, said, “Nigeria’s multiple exchange rate system is likely to remain a key drag, keeping long-term investors on the side lines.”

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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