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SEC Proposes New Rule on Derivatives Trading

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  • SEC Proposes New Rule on Derivatives Trading

The Securities and Exchange Commission has proposed changes and new rules regarding derivatives trading and registration requirements for commodity brokers.

SEC said the rules would be applicable to Exchange Traded Derivatives and OTC Derivatives.

It said for registration, its approval should be sought and obtained prior to the introduction of any contract, adding that any application for registration of a contract must be filed with the commission by or on behalf of an exchange with the SEC form and an information memorandum.

The statement read in part, “No participant or any capital market operator shall trade in ETD without the prior registration by the commission. Funds shall only invest in derivatives if it is expressly stated in their Trust Deeds. Where an underlying security is suspended from trading or delisted, contracts on such underlying shall cease to trade.

“ETD can only be traded on exchanges recognised by the commission. No persons shall trade on ETD either for proprietary accounts or on behalf of clients except entities registered as derivatives trading members and/or derivatives clearing members.

“The Exchange shall have the responsibility for market surveillance to ensure derivatives prices reflect demand and supply and that all forms of market manipulations are prevented. Participants and registered capital market operators shall disclose their outstanding derivative exposures to the commission on a periodic basis as may be determined by the commission.”

SEC said a derivatives clearing member would be in default if it failed to fulfil any of its contractual obligations.

It said where a DCM was unable to meet its obligation, the Exchange and/or the central counterparty would take appropriate steps to close out, auction or liquidate the proprietary positions of the DCM.

The commission said it would charge fees for registration of contracts and issue guidelines on fees for trading and clearing of contracts in the secondary markets.

According to the statement, violation of any provision of the rules and regulations will be liable to a penalty of not less than N1m and a further sum of not more than N25,000 for every day of default.

On the amendment to registration requirements for commodity brokers, SEC said the filing, processing and registration fees payable were deliberately reduced to attract participants.

It said the evidence of payment of filing/application fee, processing fee, registration fee and sponsored individual fee would be N10,000, N20,000, N50,000 and N10,000, respectively.

The commission added that the evidence of required minimum paid-up capital would now be N3m for commodity brokers and commodity dealers, while that of a commodity broker/dealer would be N10m.

According to SEC, the justification for the minimum capital is that commodity brokers are expected to play in the spot market and as such, do not require much capital.

It stated that “the nature of the market is such that it does not require professionals with huge capital base.”

“All comments and input should be forwarded to the Secretariat, Rules Committee of the commission or through the acting Director-General, SEC, not later than two weeks from the date of this amendment,” the statement added.

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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