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Nigerian Bourse Pares Gains on Profit Taking

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Nigerian stock market - Investors King
  • Nigerian Bourse Pares Gains on Profit Taking

Profit taking in bellwether stocks prevented the Nigerian equities market from sustaining the gains recorded the previous week as the Nigerian Stock Exchange (NSE) All-Share Index fell marginal by 0.06 per cent to close at 41.218.72. Also, market capitalisation shed N9.5 billion to close the week lower at N14.931 trillion. The market had appreciated by 1.05 per cent the previous week due to bargain hunting activities and investors’ reactions improved to first quarter results by some companies.

The market could not record another positive close last week as the benchmark indicator sagged under the pressure of profit taking. However, the NSE Premium, NSE Banking, NSE Industrial goods, and NSE Pension indices appreciated by 0.12 per cent, 1.56%, 1.06 per cent and 0.21 per cent respectively.

Analysts at Meristem Securities Limited said in spite of gains recorded in the banking and industrial goods space, the market closed downbeat.

“The market’s performance was majorly dragged by selloffs across counters in the oil & gas, consumer goods and insurance sectors,” they said.

In their own opinion, analysts at Cordros Capital Limited said: We look for return of gains on the bourse in the medium to long term, amidst fast-declining yields in the alternative fixed income market. More so, as macroeconomic fundamentals continue to impress.”

Daily Performance

The market consolidated on the positive performance of the previous week on when trading resumed on Monday. The benchmark index rose by 0.06 per cent to close at 41,268.01, while market capitalisation ended higher at N14.95 trillion. The appreciation recorded in the share prices of FBN Holdings, Dangote Cement, Fidelity Bank, Zenith Bank, and GTBank Plc propelled the growth.

Similarly, activity level trended higher as volume and value traded improved 41.1 per cent and 77.4 per cent to 450.5 million shares and N5.0 billion respectively. The three most actively traded stocks were Mutual Benefit (130.96 million share), UBA (67.75 million shares) and FBN Holdings (53.61 million shares).

In terms of sectoral performance, two of the five tracked indicators, however, appreciated. The NSE Industrial Goods Index recorded the highest gain, rising by 0.6 per cent following appreciation recorded by in Dangote Cement and CCNN. The NSE Banking Index trailed rising 0.4 per cent due to buying interests in GTBank and FBN Holdings. On the negative side, the NSE Consumers Goods Index led with a fall of 0.8 per cent following losses posted by Nestle, Dangote Sugar Refinery and Dangote Flour Mills. The NSE Insurance Index and NSE Oil & Gas Index shed 0.2 per cent and 0.1 per cent in that order.

The market sustained the positive performance on Wednesday, growing marginally by 0.09 per cent to close at 41,306.02, driven by gains in the share prices of Union Bank, Dangote Cement, Access Bank, Zenith Bank and UBA. The market capitalisation also appreciated same margin to close at N14.96 trillion. Ex-Dangote Cement the market would have closed 0.85 per cent lower.

But activity level was mixed as volume traded declined by 38.7 per cent to 276.2 million shares while value traded trended up 38.9 per cent to N6.9 billion. Wednesday’s top traded stocks by volume were UBA (52.3 million shares), GTBank (42.3 million shares) and Zenith Bank (30.1 million shares) while most active stocks by value were Dangote Cement (N2.1 billion), GTBank (N1.9 billion) and Zenith Bank (N832.4 million).

Unlike the previous day, three of five went up led by the NSE Oil & Gas Index with 1.2 per cent. The NSE Banking Index trailed with a gain of 0.6 per cent, just as the NSE Industrial Goods Index chalked up 0.3 per cent.

Conversely, the NSE Consumer Goods Index led laggards as losses in Nestle and Nigerian Breweries dragged the index lower by 1.1 per cent. The NSE Insurance Index shed 0.59 per cent.

The bears returned to the market on Thursday reversing the gains posted in the previous trading sessions. Specifically, the index fell by 0.48 per cent to close at 41,107.81. Profit taking in International Breweries, Dangote Cement, Nigerian Breweries, Unilever, and Dangote Sugar was mainly responsible for the decline of the day.

However, activity level was mixed as volume traded rose 16 per cent to 320.4 million shares while value traded fell by 30.9 per cent to N4.8 billion. Top traded stocks in volume terms were: UBA (79.9 million shares), Access Bank (57.0 million shares) and E-Tranzact (20.3 million shares) while the top traded in value were UBA (N935. 2 million), Access Bank (N644.4 million) and Zenith Bank(N488.3 million).

Despite the bearish trading, two of the sectoral indicators bullish. The NSE Banking Index appreciated by 0.8 per cent, while the NSE Insurance Index rose by 0.2 per cent.

On the contrary, the NSE Consumer Goods Index fell 1.5 per cent due to selloffs in International Breweries Plc, Nigerian Breweries Plc and Unilever Nigeria Plc. The NSE Oil & Gas Index trailed, shedding 0.8 per cent, just as the NSE Industrial Goods Index shed 0.2 per cent.

The recovered on Friday with the benchmark index rising 0.27 per cent to close at 41, 218.72 per cent, while market capitalisation ended higher at N14.93 trillion.

However, the gain on Friday was not enough to save the market from closing the week with a decline. In all, the market shed 0.06 per cent in the review week.

Market Turnover

In the four-day trading sessions investors traded 1.331billion shares worth N20.835 billion in 18,695 deals compared with 1.825 billion shares valued at N24.653 billion that exchanged in 23,148 deals.

The Financial Services Industry led the activity chart with 1.042 billion shares valued at N11.275 billion traded in 9,665 deals, thus contributing 78.32 per cent and 54.11 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 84.124 million shares worth N4.322 billion in 3,691 deals. The third place was occupied by Oil and Gas Industry with a turnover of 51.918 million shares worth N596.463 million in 2,307 deals.

Trading in the top three equities, UBA, Mutual Benefits Assurance Plc and Access Bank Plc accounted for 457.930 million shares worth N3.784 billion in 1,469 deals and contributing 34.41 per cent and 18.16 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 709,058 units of Exchange Traded Products (ETPs) valued at N3.845 million executed in 10 deals, compared with a total of 56,260 units valued at N376,387.48 that was transacted the previous week in six deals.

Similarly, a total of 80,152 units of Federal Government and State Bonds valued at N82.543 million were traded last week in 14 deals, compared with a total of 725 units valued at N660,984.55 transacted the previous week in 10 deals.

Price Gainers and Losers

Meanwhile, 37 equities appreciated in price during the week, higher than 33 in the previous week, while equities depreciated in price, lower than 41 equities in the previous week.

C & I Leasing led the price gainers with 29.5 per cent, trailed by Unity Bank Plc with 20 per cent. Veritas Kapital Assurance Plc chalked up 17.8 per cent, just as Cement Company of Northern Nigeria Plc and Beta Glass Plc garnered 14.6 per cent and 10.2 per cent respectively.

Other top price gainers included: Livestock Feeds Plc (9.0 per cent); NPF Microfinance Bank Plc (8.5 per cent); Mutual Benefits Assurance Plc (8.3 per cent); Union Bank of Nigeria Plc (7.2 per cent0 and Vitafoam Nigeria Plc (6.4 per cent).

Conversely, Dangote Flour Mills Plc led the price losers with 18.5 per cent, trailed by Eterna Plc with 13.0 per cent. Prestige Assurance Plc shed 11.7 per cent, while Dangote Sugar Refinery Plc went down by 11.2 per cent.

Other top price losers included: Regency Alliance Insurance Plc (10 per cent); Oando Plc 8.7 per cent); Chams Plc (8.7 per cent); Japaul Oil & Maritime Services Plc (8.0 per cent); WAPIC Insurance Plc (7.0 per cent); Niger Insurance Plc (6.6 per cent).

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

GTBank Takes 60 Bank Executives to Court Over N17bn Loan Dispute

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Guaranty Trust Bank (GTBank) has initiated legal proceedings against 60 top executives from 13 commercial banks in Nigeria.

The action stems from an ongoing dispute involving a N17 billion Anchor Borrowers Programme loan granted to AFEX Commodity Exchange.

The executives, including chairmen, chief executive officers, directors, and company secretaries, are facing contempt of court charges for allegedly failing to enforce a No-Debit-Order on AFEX Commodity Exchange’s accounts. The legal battle, which has drawn significant attention in the financial sector, is being closely monitored by industry stakeholders.

Details of the Case

The Federal High Court in Lagos, presided over by Justice CJ Aneke, signed an order to hold the executives accountable for disobeying its ruling dated May 27, 2024.

The court’s decision mandates the executives, including those from prominent banks such as Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, and First Bank of Nigeria Plc, to comply with the directive or face jail time.

The case, registered as FHC/L/CS/911/2024, involves GTBank and AFEX Commodity Exchange. The court had previously ordered 20 banks to transfer funds from AFEX’s accounts to GTBank until the outstanding N17.81 billion loan is repaid.

This sum includes the principal amount of N15.77 billion and additional recovery costs and expenses totaling N2.04 billion.

Contempt Proceedings

The legal notice, titled ‘Order to Serve Notice of Disobedience to Order of Court via Newspaper Publication,’ was published in national dailies, signaling the gravity of the situation.

The notice serves as a warning to the bank executives about the consequences of failing to adhere to the court’s order.

In addition to the commercial banks, the Nigerian Deposit Insurance Corporation (NDIC), acting as the liquidator for Heritage Bank, has also been cited for contempt.

The matter is set for further hearing next Thursday, where the court will decide the fate of the implicated executives.

Background and Implications

The dispute originates from a loan facility extended to AFEX Commodity Exchange under the Central Bank of Nigeria’s (CBN) Anchor Borrowers Programme.

The loan was intended to finance smallholder farmers, with repayment expected through the sale of agricultural produce. However, AFEX reportedly defaulted on the loan, prompting GTBank to seek legal recourse.

AFEX has countered by stating that it has repaid 90% of the loan and is in ongoing discussions with the CBN regarding the remaining balance. The commodities exchange has cited economic challenges and macroeconomic policies, such as the naira redesign, which adversely affected the farmers’ ability to repay the loans.

The court has also permitted GTBank to take control of AFEX’s 16 warehouses across seven states, allowing the bank to sell the stored commodities to recover the outstanding loan.

Industry Reaction

The case has sparked concerns about the efficiency and integrity of Nigeria’s banking and financial sectors.

Charles Akinbobola, a senior energy analyst at Sofidam Capital, said, “The challenge of the power sector has not entirely been the scarcity of funds. Several trillions of naira have been pumped into that industry. The sector has been plagued by the shortcomings of its managers.”

Experts like Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, emphasize the need for addressing fundamental issues in the electricity value chain, such as technical and commercial losses, which continue to burden consumers with inefficiency costs.

As the legal proceedings unfold, the financial community will be watching closely to see how this high-stakes battle impacts the involved parties and the broader financial sector in Nigeria.

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Banking Sector

Guaranty Trust Holding Plans N500 Billion Share Offering

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Guaranty Trust Holding Company Plc (GTCOPLC) has announced plans to raise up to N500 billion through a new share offering, according to a preliminary prospectus filed with the Securities and Exchange Commission (SEC).

This move aims to support the company’s ambitious growth and expansion strategy.

GTCOPLC’s proposed offering will involve the subscription of ordinary shares of 50 kobo each, although the exact number of shares and the price range are yet to be determined.

The offering includes a concurrent filing of a preliminary universal shelf registration statement, allowing the company to issue various types of securities, potentially raising up to $750 million in multiple currencies.

Purpose of the Offering

The funds raised from this offering will primarily be allocated towards:

  1. Business Growth and Expansion: GTCOPLC plans to invest significantly in technology infrastructure to enhance its current operations. Additionally, the company intends to establish new subsidiaries and make selective acquisitions of non-banking businesses.
  2. Recapitalization of Guaranty Trust Bank Limited: Part of the proceeds will be used to strengthen the capital base of its banking subsidiary.

Target Investors and Structure

The offering is structured to attract both institutional and retail investors. It will be divided into two main tranches:

  • Nigerian Tranche: An institutional and retail offering aimed at eligible investors within Nigeria.
  • International Tranche: A private placement targeting qualified institutional buyers outside Nigeria.

Listing and Trading

GTCOPLC has also filed an application with the Nigerian Exchange Limited (NGX) to list and admit the new ordinary shares for trading on the NGX Official List.

The company anticipates opening the offering by July 2024.

Financial Strategy

The universal shelf registration will enable GTCOPLC to issue a variety of securities over time, with a total value of up to $750 million (or its equivalent in Nigerian Naira).

This approach provides the company with flexibility to raise capital in different markets during the programme’s validity period. The current proposed offering will be the first issuance under this new programme.

Regulatory Compliance

GTCOPLC emphasized that this notice does not constitute an offer of securities for sale in the United States or to U.S. persons, as defined under Regulation S of the U.S. Securities Act of 1933.

The offered shares have not been, and will not be, registered under the U.S. Securities Act or any state securities laws, and cannot be sold in the United States without proper registration or an applicable exemption.

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Loans

China Maintains One-Year Policy Loan Rate at 2.5%, Avoids Excessive Liquidity

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China’s central bank, the People’s Bank of China (PBOC), has decided to keep the key interest rate steady for the tenth consecutive month.

On Monday, the PBOC announced that the rate on one-year policy loans, known as the medium-term lending facility (MLF), will remain at 2.5%.

This decision aligns with the forecasts of a Bloomberg survey, reflecting the bank’s priority to maintain financial stability amid a fragile economic recovery.

The central bank also took measures to manage liquidity, withdrawing a net 55 billion yuan ($7.6 billion) from the banking system.

This action aims to prevent excessive liquidity, which could lead to further depreciation of the yuan. By maintaining a cautious stance on monetary easing, the PBOC underscores its focus on currency stability over lowering borrowing costs.

This move comes as China grapples with mixed economic signals. While exports exceeded expectations in May, inflation rose less than anticipated, and factory activity saw an unexpected contraction according to an official survey.

Despite these challenges, the PBOC’s restraint reflects a strategic choice to prioritize the strength of the yuan, even as calls for a rate cut grow louder.

Last week, the onshore yuan weakened to its lowest level since November, driven by a wide interest rate gap between the US and China.

The PBOC’s decision to hold rates steady is seen as an effort to prevent further devaluation of the yuan, which remains a “powerful currency” according to financial authorities.

Sufficient market liquidity has also influenced the central bank’s decision to refrain from outright rate cuts.

This is evidenced by the declining borrowing costs of popular debt instruments, such as one-year AAA-rated negotiable certificates of deposits, which have dropped to around 2%, compared to the MLF’s 2.5%.

The influx of funds from savings to wealth management products and other higher-yielding assets has bolstered the financial system’s liquidity, allowing the PBOC to adopt a more conservative stance.

China’s economy has experienced a patchy recovery, with government bond sales accelerating to boost infrastructure spending amidst a prolonged property slump.

Despite these efforts, the central bank remains cautious, opting for stability over aggressive monetary easing.

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