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Investors Splash N12.56 Trillion on Fixed Income, Currency Instruments in February

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  • Investors Splash N12.56 Trillion on Fixed Income, Currency Instruments in February

Trading activities in Nigeria’s Fixed Income and Currencies (FIC) markets in February enjoyed a boost as investors, mostly banks, increased their stake by N860 billion. Transaction turnover for February increased to N12.56 trillion, from N11.71 trillion recorded in January, representing a 7.34 per cent growth month on month (MoM) and 3.46 per cent or N420 billion increase year on year (YoY).

In contrast, the markets recorded a drop in turnover to the tune of N150 billion in January, representing 1.28 per cent decrease compared to the value recorded in December 2017. Year on year, however, turnover was up by 28.17 per cent in January 2018 or N2.57 trillion.

Three segments – Treasury Bills, Foreign Exchange and the Money Market (Repurchase Agreements/Buy-Backs and Unsecured Placements/Takings) – contributed 94.47 per cent to the total turnover in the FIC markets in the review month.

As usual, activities in the Treasury Bills (T.bills) market were more robust than others, as it accounted for 44.44 per cent of market turnover in February, compared to 39.24 per cent in January. The Foreign Exchange (FX) market accounted for 33.13 per cent of the total turnover (37.50 per cent in January).

Transactions in the FX market settled at $12.92 billion (N4.16 trillion) in February, a decrease of 7.78 per cent ($1.09 billion) when compared with the value recorded in January ($14.01 billion).

In the month under review, the naira depreciated at the Investors’ and Exporters’ (I&E) FX Window, closing the month at $/N360.41 (from $/N360.00 as at January 31, 2018), while also trading at a discount to the parallel market, which closed at $/N363.00 (from $/N364.00 as at January 31, 2018).

The CBN4 Official Spot rate depreciated slightly, losing N0.20 to close at $/N305.90 (from $/N305.70 as at January 31, 2018).

Total value traded at the I&E FX Window in February settled at $3.90billion, a decrease of 25.71 per cent ($1.35 billion) relative to the value recorded in January ($5.25 billion). This brings the total value traded at the Window Year to Date to $9.15 billion.

Inter-Member trades recorded $1.36 billion in February, an increase of 23.64 per cent ($0.26 billion) relative to the trades recorded in January ($1.10 billion), and a 63.86 per cent ($0.53 billion) increase year on year.

Member-Client trades stood at $7.45 billion, a decrease of 14.65 per cent ($1.27 billion) from the previous month and a 30.02% ($1.72 billion) increase year on year.

Member-CBN trades recorded $4.11 billion in February ($4.18 billion in January), representing a decrease of 1.67 per cent ($0.07 billion) MoM and a 204.44 per cent ($2.76 billion) increase YoY ($1.35 billion), as the effect of the Secondary Market Intervention Sales (SMIS) continued to boost activity in the FX markets.

The 19th Naira-settled OTC FX Futures contract, NGUS FEB 28, 2018, worth $353.26 million, matured and settled in February, while a new 12-month contract – NGUS FEB 27, 2019 – for $1 billion was introduced by the CBN at $/N362.09.

Turnover in the Fixed Income market for the month under review settled at N6.27 trillion, a 17.63 per cent increase MoM (0.93 trillion). Transactions in the T.bills market accounted for 89.06 per cent of the overall Fixed Income market, an increase from the 86.11 per cent recorded in January.

Outstanding T.bills at the end of the month stood at N12.56 trillion (N11.47 trillion in January), an increase of 9.56 per cent MoM (₦1.91 trillion). FGN bonds outstanding value also increased marginally close at N7.73 trillion, from N7.64 trillion in January.

Trading intensity in the fixed income market for the month under review settled at 0.44 and 0.09 for T.bills and FGN bonds, respectively, from 0.40 and 0.10 respectively recorded the previous month. T.bills between the six and 12 months maturity buckets became the most actively traded, accounting for a turnover of N2.23 trillion in February while short-term yields on the sovereign yield curve increased by an average of 29 basis points (bps) and yields in the medium- and long-term spectrum gained an average of 0.34bps and 0.21bps, respectively.

The spread between 10-year and 3-month benchmark yields closed negative at 1.17 basis points for February 2018 (0.49 bps in January)

Activities in the secured Money Market (i.e. Repos/Buy-Backs) settled at N2.03 trillion in February, 9.14 per cent (N0.17 trillion) higher than the value recorded in January (N1.86 trillion). Year on year, turnover on Repos/Buy-Backs recorded a 21.02 per cent increase (N0.35 trillion) from the value recorded in February 2017 (N1.68 trillion).

Unsecured Placements/Takings closed the month at a turnover of N93.75 billion, a 22.27 per cent decrease (N26.85 billion) from the figure recorded in January (N120.61 billion) and a 33.6 per cent decrease (N47.51 billion) on YoY basis (N141.27 billion as at February 2017).

Average O/N8 NIBOR9 for the period under review stood at 19.91 per cent (11.24 per cent in January), indicating a decrease in inter-bank liquidity.

The number of executed trades captured on the E-Bond Trading System in February amounted to 16,325 as against 17,041 recorded in January while executed T.bills trades decreased by 3.69 per cent (539), similarly FGN bonds decreased by 7.22 per cent (177).

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

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

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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

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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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