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MTN Nigeria Generates N1.35 Trillion in Revenue in 2020

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MTN Nigeria - Investors King

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.

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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Decent Trade Surplus Recorded in FY2023 – Coronation Economic Note

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Institute of Chartered Shipbrokers

The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade grew by +128.6% y/y to N26.8trn in Q4 ’23 vs +53.2% y/y in Q3 ‘23.

The total export value increased by 22.7% q/q to N12.7trn compared with N10.4trn recorded in Q3 ‘24. This can be partly attributed to c.20% depreciation of NGN/USD recorded in Q4 ‘23.

For FY2023, total exports increased by 34.2% y/y to N35.96trn. The import value increased by 56.04% q/q to N14.1bn from N9.0trn in Q3 ‘23. We note that imports were affected by the weaker naira following the fx liberalization policy.

For FY2023, imports increased by 40.4% to N35.92trn. Total trade as a percentage of nominal GDP (2023) stood at 30.4% in 2023, compared with 26.3% in 2022. In FY2023, Nigeria recorded a surplus of +N44.8bn.

According to the NBS report, the top six import sources were China N6.6trn (19.5%), India N2.8trn (N8.5%), USA N2.2trn (6.6%), Netherlands N1.8trn (5.3%), Brazil N810bn (2.4%), and the UK N688bn (2.0%). These countries collectively accounted for 44.4% of total imports in 2023. Imports from ECOWAS stood at N168bn, representing 19% of total imports within Africa.

Manufactured goods accounted for the largest share of imports, 51.2% and its import value grew significantly by 66.9%y/y. Following closely, petroleum oil products accounted for 33.42% of imports, and grew by 18.8%y/y. Raw materials accounted for 8.4%. Conversely, solid minerals registered a modest share of 0.53%. Agricultural goods followed suit with a 6.35% share, experiencing a notable growth in value of 22.3% y/y.

Regarding exports, the top six export destinations include Netherlands with exports valued at N4.5trn (12.6%), Spain N3.3trn (N9.4%), India N3.0trn (8.4%), the United States N2.6trn (7.3%), France N2.3trn (6.5%), and the Economic Community of West African States (ECOWAS) N2.2trn (6.2%). These destinations collectively accounted for 50.4% of total exports in 2023.

Crude oil accounted for 80.6% of total exports in 2023, its export value grew by 37.4% y/y to N29trn vs +46.4%y/y recorded in 2022. Based on a separate data from the NURPC, average crude oil production (condensates inclusive) in 2023 was 1.47mbpd compared with 1.38mbpd in 2022.

This is lower than the OPEC production quota for Nigeria which was 1.7mbpd.

Non-oil exports grew by 22.2% y/y to N6.9trn and accounted for 19.4% of total exports. Superior quality cocoa beans, cut flowers, sesamum seeds, soybeans, natural cocoa butter, soya beans, crude groundnut oil, frozen shrimps and prawns, shelled cashew nuts, crude palm kernel oil, and ginger among others were featured as top export commodities in 2023.

Nigeria exported goods worth N2.2trn to ECOWAS, compared with N1.7trn in 2022. This represented 60.2% of total exports within Africa. The most adopted port for exports in Q4 ’23 was the Apapa Port. Goods worth N11.9trn exited the country through this port which accounted for 94.4% of total exports. Other ports widely used include Tin can Island N(386.8bn), and Port Harcourt (N241.3bn)

GLOBAL FOCUS/REGIONAL TRADE

According to data from the World Trade Organization (WTO), merchandise trade declined by -8.2% y/y to US11.8trn in Q3 ‘23 compared with USD12.9trn recorded in the corresponding period of Q3 ‘22.

Meanwhile, on a q/q basis, total merchandise trade declined marginally by -1.4%. The decline can be partly attributed to weakened global demand as well as shifts in its composition toward domestic services, the effects of a stronger USD and rising trade barriers.

The Black Sea grain deal was terminated by Russia in July ’23, leading to rising food prices in import-dependent countries. However, Ukraine discovered a new corridor (the Danube River) to export its grains. As at end ’23, Ukraine had exported over 5.6 million metric tons of grain and other products through this corridor.

As at end-February ’24, the price of wheat moderated by -8.5% m/m to close at USD576.3/MT. The price of wheat recorded a downward trend m/m.

This was largely due to increased Russian exports, competitive pricing in the Black Sea region, abundant global stocks, diminishing international demand, and the prospect of another massive Russian crop.

Maize prices also moderated by -4.8% m/m to close at USD189.1/MT. Meanwhile, Cocoa prices increased by +34.1% m/m due to a decline in the supply prospects on the back of poor harvests in West Africa.

The El Niño weather phenomenon has been causing drier weather in Ghana and Ivory Coast, which are the world’s two biggest producers of cocoa beans.

Turning to China, despite the challenges posed by the property sector, trade exports increased by 0.9% q/q to USD861.6bn in Q3 ’23 compared with USD853.6bn recorded in Q2 ’23.

Notably, China’s PMI increased marginally to 50.9 in February ’24 from 50.8 in January ’24. We expect a loosening or a hold stance in the near term as China continues to seek ways to bolster its economy amid the downturn in its property sector.

In Africa, total merchandise trade declined by -3.3% q/q to USD312.6bn in Q3 ’23, compared with USD323.3bn in Q2 ’23. It is worth noting that the region recorded a trade deficit of -USD23.1bn in Q3 ’23. It is worth highlighting that resource rich economies like South Africa recorded a trade surplus in Q3 ’23.

Meanwhile, non- resource rich economies like Kenya and Egypt recorded trade deficits in Q3 ’23. The United Nations Conference on Trade and Development disclosed that, in 2019, intra-African trade accounted for less than 15% of total exports among African countries.

This suggests that there are potential benefits from increased regional trade. Overall, we expect the country’s external position to remain vulnerable to fluctuations in global oil price and weak domestic oil production.

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Finance

CBN’s Proposed Capital Hike Threatens Stability, Ernst and Young Report Warns

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Central Bank of Nigeria (CBN)

A storm is brewing in Nigeria’s banking sector as the Central Bank of Nigeria’s (CBN) proposed capital hike threatens to destabilize the industry, according to a recent report by Ernst and Young.

The report, titled “Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation,” paints a grim picture of the potential fallout from such a move.

Ernst and Young’s analysis suggests that if the CBN increases the minimum capital base for commercial banks by 15-fold, from the current N25 billion, only seven out of the existing 24 Deposit Money Banks may survive the upheaval.

This revelation underscores the magnitude of the challenge facing the banking sector and raises concerns about the stability of the financial system.

The proposed capital hike comes in the wake of the CBN’s efforts to bolster banks’ capacity to support Nigeria’s ambitious goal of becoming a $1 trillion economy by 2026.

However, the report highlights the significant hurdles that lie ahead, particularly for smaller banks that may struggle to meet the new requirements.

The last major banking reform in 2004 saw a similar increase in the capital base, resulting in massive mergers and acquisitions that reduced the number of banks from 89 to 25.

Now, nearly two decades later, history seems poised to repeat itself, with the potential for widespread consolidation and restructuring in the industry.

Industry experts have expressed mixed reactions to the proposed capital hike. While some welcome the move as necessary for ensuring financial stability and supporting economic growth, others caution against the potential negative impact on smaller banks and urge the CBN to consider alternative strategies.

As the debate intensifies, all eyes are on the CBN to see how it will navigate the delicate balance between regulatory requirements and industry resilience in the face of mounting challenges.

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Loans

Nigeria in Talks with World Bank for $1bn Loans to Aid Displaced Persons and Rural Development

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world bank - Investors King

In a bid to tackle the challenges confronting internally displaced persons (IDPs) and bolster rural development initiatives, the Nigerian government has entered negotiations with the World Bank for loans totaling $1 billion.

This financial infusion aims to address the pressing needs of IDPs and uplift rural communities across the nation.

The proposed loans, detailed in World Bank documents titled ‘Solutions for the Internally Displaced and Host Communities Project’ and ‘Rural Access and Agricultural Marketing Project – Scale Up,’ signify a concerted effort by the government to provide comprehensive support to vulnerable populations and enhance economic opportunities in rural areas.

With an allocation of $500 million earmarked for IDP assistance and an additional $550 million dedicated to rural access and agricultural marketing, these loans underscore the government’s commitment to fostering inclusive growth and resilience within communities grappling with displacement and economic challenges.

The World Bank’s involvement underscores the global community’s recognition of Nigeria’s efforts to address humanitarian crises and promote sustainable development.

The loans are poised to fund initiatives aimed at improving access to basic services, fostering social cohesion, and enhancing livelihood opportunities for IDPs and their host communities, particularly in conflict-affected regions of the country.

Furthermore, the infusion of funds into rural access and agricultural marketing endeavors is poised to unlock new pathways for economic growth, empower local farmers, and bridge the gap between rural communities and broader markets.

As negotiations progress, stakeholders anticipate transformative impacts that will propel Nigeria towards a more prosperous and inclusive future for all its citizens.

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