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Banks Review Foreign Currency Holdings

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CBN
  • Banks Review Foreign Currency Holdings

Commercial banks are revaluing their foreign currency holdings and paying off debts ahead of timeline as dollar liquidity improves.

The improvement seen in foreign reserves at $47 billion, regular Central Bank of Nigeria (CBN) foreign exchange interventions, over $51 billion in Investors’ & Exporters’ Forex Window and other foreign capital inflows have all helped to boost banks’ dollar positions and strengthened investors’ confidence in the economy.

First Bank Nigeria Limited redeemed a $300 million Eurobond before maturity and paid all bondholders. The seven-year bond was issued in 2013 at 8.25 per cent and had been due to be repaid in 2020. The bank announced its intention last month to repay the debt before maturity. It said the redemption had no impact on its capital ratios and that it had built up dollar liquidity over the past year.

The bank said it did not plan to issue another Eurobond in the near term, because it had ample liquidity to meet its foreign and local currency funding needs.

Also, a report by Exotic Capital, emerging market investment bank, on GTBank showed the lender enjoys “robust net long dollar position”, which should continue to provide a natural hedge to further exchange rate adjustments.

The bank’s non-interest revenue for the second quarter of 2018 was boosted by strong foreign exchange trading gains, including N6 billion in forex trading gains compared with N21 million loss in second quarter of 2017 when forex crisis was intense. This, in addition to notable increases in dividend income/recoveries, net fee income and foreign currency revaluation gains put the lender in good position.

The CBN, in the communique released after the last Monetary Policy Committee (MPC) meeting, acknowledged the progress made in recent times in stabilizing the foreign exchange market and anchoring inflation expectation lower.

It said supportive external account condition – stable oil prices, rising current account surplus and external reserves – which empirical studies have emphasised to be the major anchor of monetary policy all point to improvement in the foreign currency positions for the economy and banks.

Nigerian banks cut lending last year due to weak economic growth and foreign currency risk. However, several of them are eyeing loan growth this year, citing economic improvements and especially as the CBN introduces liquidity to the banking sector targeting credit to manufacturers.

The foreign exchange reserves currently at $47 billion have continued to ensure that the naira remains stable at the official and parallel markets.

The naira exchanges at N361 to dollar in the parallel market and N305.6 in the official market, and has remained at that rate since April, last year after the CBN resumed foreign exchange interventions in the market.

The Exotic Capital report said although the level of reserves was still significantly below the record high of $64 billion recorded in August 2008, it is nearly double the low of $24 billion recorded in October 2016, increasing by more than $22 billion in a mere 15 months.

“We have written extensively on Nigeria’s multiple exchange rate system and will abstain from further discussion at present, suffice to say that a fairly valued naira at N360 to dollar combined with high domestic rates has led to a tremendous increase in the level of gross foreign reserves held at the CBN,” it said.

“With reserves at their current levels, it is easy to imagine the MPC being in a position where it could afford to cut as it is less dependent on attracting dollar inflows than it has been to both build reserves and stabilise the naira,” it said.

A similar report by FBN Capital, titled: “Towards the $50 billion threshold, and counting”, said the rapid accumulation of $15.96 billion over 12 months is due to two sizeable Eurobond launches, a small diaspora bond issue, the recovery in oil export revenues (through the Nigeria National Petroleum Corporation’s share of production and, more recently, the steady bid by the CBN at the I&E Forex window.

“We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks. The steady bid by the CBN has been seen variously as a response to the softening of demand for forex by importers and other economic actors, and as a move to contain naira appreciation,” the FBN Capital said.

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.

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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Finance

Nestle Nigeria Approves Final Dividend of N35.50k per 50 Kobo Ordinary Share for 2020

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Nestle

Nestle Nigeria Approves Final Dividend of N35.50k per 50 Kobo Ordinary Share for 2020

Nestle Nigeria, a leading food and beverage company, has declared a final dividend of N35.50k per 50 kobo ordinary share for the year ended December 31, 2020.

The beverage company said N24.50k of the amount declared was from the after-tax profit of 2020 and N5 and N6 were from the after-tax retained earnings of the years ended December 2019 and 2018, respectively.

Nestle Nigeria stated that the amount declared is subject to appropriate withholding tax and approval at the Annual General Meeting of shareholders.

It also noted that payment will be made only to shareholders whose names appear in the Register of Members as at the close of business on 21 May 2021.

Dividends will be paid electronically to shareholders whose names appear on the Register of Members as at 21 May 2021, and who have completed the e-dividend registration and mandated the Registrar to pay their dividends directly into their Bank accounts.

Shareholders who are yet to complete the e-dividend registration are advised to download the Registrar’s E-Dividend Mandate Activation Form, which is also available on their website: www.gtlregistrars.com, complete and submit to the Registrar or their respective Banks.

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Banking Sector

Dennis Olisa Invests N53.6 Million in Zenith Bank

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Executive Director of Zenith Bank Plc Buys 2 Million Shares of Zenith Bank at N53.6 Million

Executive Director of Zenith Bank Plc, Dennis Olisa, has invested a combined N53.58 million in shares of Zenith Bank.

The leading financial institution stated in a disclosure statement filed with the Nigerian Stock Exchange (NSE) on Monday.

Olisa carried out the purchase in two different transactions on February 24, 2021 at the Nigerian Stock Exchange in Lagos, Nigeria.

He purchased 1 million units of Zenith Bank at N26.60 each and another 1 million shares at N26.50 per share.

On aggregate, Olisa purchased 2 million shares of Zenith Bank at N26.79 per share or N53.58 million. See the details below.

Dennis Olisa was appointed as Zenith Bank’s executive director three years ago.

Prior to his appointment, Mr. Olisa was the Chief Inspector at Zenith Bank Plc and served as its Director from March 3, 2017 until March 16, 2017.

He also served as General Manager and Heads of the Energy Oil & Gas Group at Zenith Bank Plc and served as its Deputy General Manager. He served as Head of Internal Control & Audit Group at Zenith Bank Plc

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