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With Weak Appetite for Bonds, Foreign Investors Embrace Treasury Bills



  • With Weak Appetite for Bonds, Foreign Investors Embrace Treasury Bills

Nigeria’s investment climate recorded a mixed performance in the month of August in line with global trends. A review of the different segments of the markets where investors staked their funds showed that foreign investors have continued to dump the FGN Bond as a result of persisting risk-off sentiments across emerging markets. Nevertheless, the best investment option in August was treasury bills where a reasonable gain was made by investors while outright losses were recorded in the equities market. Bamidele Famoofo reports


Returns across global markets in the eighth month were mixed with the US market posting solid gains. Investors in the Euro area recorded losses, and mixed returns emanated from Asia.

Cordros Research review of the month indicated that US benchmark indices – DJIA (+2.16 per cent) and S&P 500 (+3.03 per cent) – closed the month positive, as investor sentiment was broadly positive during the period. Positive economic data, such as the revised estimates of US GDP – which showed that a higher than expected annual growth of 4.2 per cent was recorded in Q2-18, vs. 4.1 per cent previously estimated — contributed positively to market sentiment. Also, earlier optimism on the resolution of the US-China trade rifts earlier in the month, although short-lived, contributed to positive sentiments. Furthermore, on trade, progress was made by the Trump administration on its intention to replace the North American Free Trade Agreement, following talks with Mexico and optimism surrounding Canada. These offset the impact of selloffs which ensued, following commentary by Fed’s Powell on coming rate hikes.

While investments in the US were upbeat, proceedings turned negative in the Euro area, with the FTSE 100 and the Euro Stoxx 50 indices dropping by 4.08 per cent and 3.76 per cent, respectively. The FTSE 100 closed the two halves of the month negative (H1: -2.45 per cent; H2: -0.85 per cent) while the Euro Stoxx 50 closed negative in the first half (-4.33 per cent) and was up marginally in the second by 0.48 per cent. Jitters surrounding trade talks, worries over the likely contagion effect of Turkey’s currency (lira) meltdown, as well as the hike in interest rates by the Bank of England, weighed on investor sentiment and outweighed the impact of positive economic data, as well as optimism of around positive outcome of Brexit talks.

Losses resurfaced in the emerging market, as China, Brazil, Nigeria, Morocco had their share of the pains. India and Kenya however registered gains at 2.76 per cent and 1.07 percent respectively.

Equities Market

Investors in the equities market recorded losses in August, as the benchmark index dropped 5.86 per cent to 34,848.45 points, resulting in a year-to-date loss of 8.88 per cent. The ASI dropped below the 35,000- mark for the first time since September 2017, following significant sell-offs by foreign investors, absence of positive market triggers and disappointing economic data release (particularly in the GDP data, wherein a contraction in the oil sector led to slower pace of growth). Other factors identified by analysts that influenced performance of the economy in the review period include improved yields in fixed income market (which created a more attractive alternative investment for investors), and news of the apex bank’s fine on four banks for “illegally” repatriating funds on behalf of telecommunications company MTN Nigeria, which led to sell pressure in the listed banks.

Similar to the previous month, all sectors indices closed in the red, with the Banking (-8.64 per cent) index posting the largest loss, followed by the Consumer Goods (-6.84per cent), Industrial Goods (-6.35per cent), Insurance (-5.99per cent), and Oil Gas (-5.69per cent) indices. Further on the negatives, total volume and value of trades in the month was 19.16per cent and 8.35per cent lower than the previous month, at 5.40 billion units and N66.92 billion respectively. Also, market breadth was negative, by a wide margin, with 78 losers and 17 gainers, led by NSLTECH (-50.00per cent) and NIGERINS (+69.23per cent) respectively.

Foreign Portfolio

The NSE’s recent foreign portfolio investor activity report for July showed that the total transactions done by foreign investors dropped by 64.68 percent to N36.17 billion as against N102.41 billion in the previous month. Also, foreign players’ proportion of total trades on the exchange dropped to 24.76 per cent, from 54.54 per cent in the previous month, which is also well-below the monthly average of 50.47 per cent (ex-August) recorded so far this year. However, it is worth stating that inflow of N19.83 billion was recorded during the review period, against N16.34 billion worth of outflows recorded in June. Analysts have attributed the declining performance of foreign players in the local market to the meltdown in emerging markets, global trade war concerns, and political risks surrounding the upcoming 2019 election in Nigeria.

Money Market

In line with experts’ expectation, the overnight lending rate in the money market fell by 275 basis points to close the month at 6.83 percent, as banking system liquidity remained buoyant (averaging N389.23 billion in August as against N267.63 billion in July) throughout the month. Inflows from matured OMO bills were valued at N2.02 trillion, while bond coupon payments, which stood at N62.15 billion boosted liquidity in the period. Demand was generally weak at the CBN’s weekly OMO auctions, with the apex bank only selling a total of N991.46 billion compared to N1.40 trillion in July. Other outflows include FX sales worth USD1.49 billion.

“We expect current buoyant liquidity to persist on the back of inflows from maturing OMO bills (N1.01 trillion), bond coupon payments (N146.83 billion), and the budgetary allocations (c. N326.06 billion) to state and local governments. In effect, a contraction in the overnight rate is likely”, Cordros Research said.

Treasury Bills

The eighth month of the year saw treasury bill yields expand by 39 basis points on average to 12.20 percent, as market players reacted to higher than expected primary auction stop rates. Buoyant liquidity drove demand for the major part of the month, however, a 158 bps increase in stop rates on average, at the final auction of the month, led to major sell-offs across the market, paring earlier gains. Consequently, average yield expanded by 39 bps month on month to 12.20 per cent.

Experts said the expectation of a healthy liquidity position in the coming month suggested likelihood of high demand in the NTB secondary market.


The bearish trend persisted in the FGN Bond market, with sustained sell-offs from foreign players due to heightened currency pressures in Argentina & Turkey, as well as increased political uncertainty in the domestic space, ahead of the 2019 general elections. In addition, higher primary market rates in both the bond and treasury bills secondary markets weighed on investor sentiments, driving yields at the mid and long ends of the curve past the 15 per cent mark for the first time since end-October 2017, despite lower inflation rate (11.14per cent in July) and stronger oil prices.

Foreign Exchange

The foreign reserves recorded significant decline in August, decreasing by $1.28 billion to $45.84 billion. The decline is 1.92x more than the $668.83 million shortfall recorded in the previous month, and is despite the 3.11 percent decrease in the apex bank’s conventional intervention ($1.49 billion) into the FX market in the month. This contradicts expectations of reduced pressure on the reserves, following the Bilateral Currency Swap Agreement (BCWA) signed with the People’s Bank of China in April. On the BCWA, CNY132.92 million was sold to the FX market, as against USD69.86 million in the previous month.

It is also worth stating that although the CBN’s inflow of FX into the I&E FX window in the month was a tad lower at $1.117 billion, compared to $1.83 billion in the previous month, the apex bank’s proportion of total inflows into the window increased to 48.52 per cent compared to 39.52 per cent in the previous month.

Total inflows into the window dropped sharply by 47.73 per cent (the highest so far this month) to $2.41 billion, following 61.36 percent and 42.50 percent drop in international and local sources to $494.9 million and $1.92 billion respectively.

However, the naira remained relatively stable during the month, as it weakened marginally against the dollar by 0.28 percent and 0.07 percent to N361 and N362.64 in the parallel market and I&E FX window, respectively.

“Despite continued decline in the foreign reserves, our outlook for the FX market remains stable, as oil prices continue to rise and production remains fairly supportive, aiding inflow of oil revenues, which provide the apex bank sufficient legroom to sustain its interventions in the currency space”, Cordros Research posited.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Banking Sector

COVID-19: CBN Extends Loan Repayment by Another One Year




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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MTN Nigeria Generates N1.35 Trillion in Revenue in 2020




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




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:, complete and submit to the Registrar or their respective Banks.

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