A new survey from Aeon Investments, the London based credit-focused investment company, with institutional investors in Europe and the US who collectively have around $574 billion in assets under management, reveals the major factors behind more professional investors increasing their allocation to structured credit.
When asked for their top three reasons for this trend, 44% selected greater innovation in the structured credit market, followed by 40% who included greater transparency in the sector.
This was followed by an improving regulatory environment, which 31% of professional investors included in their top three reasons for more professional investors increasing their allocation to structured credit; 22% cited the fact that they can offer attractive yields, which have become even more appealing given the current difficulties in the fixed income market, and one in five (20%) selected the sector’s growing focus on ESG. Some 13% cited structured credit’s ability to offer attractive diversification benefits as one of their top three reasons.
Which structured credit sectors will see the biggest increase in asset allocation from investors?
In terms of which areas of the structured credit market is likely to see the biggest inflows from investors over the next 18 months, 63% anticipate allocations to products focusing on residential real estate will see an increase, and 63% also expect this from those investment vehicles focusing on commercial real estate. Some 49% of respondents expect an increase in investment inflows into structured credit vehicles focusing on consumer credit such as student loans, auto credit/leases, compared to 11% who anticipate a decline. The corresponding figures for flows into structured credit vehicles concentrating on specialist areas of corporate finance such as commercial aviation, shipping, and trade receivables, is 42% and 12%.
Evgeny van der Geest, Managing Director, Aeon Investments said: “In recent years, the structured credit market has seen huge developments in terms of maturity and transparency, and this trend continues to gather pace. This, coupled with a growing desire to diversify portfolios and the search for yield, means more professional investors are increasing their allocation to structured credit investments.”
Central Bank of Nigeria Increases Interest Rate on Intervention Loans From 5% to 9%
The Central Bank of Nigeria has increased interest rates intervention loans to 9% per annum to ease the nation’s record high inflation rate.
The Central Bank of Nigeria (CBN) has increased interest rates on all its intervention loans by 4% from 5% to 9% per annum to ease the nation’s record high inflation rate.
Chibuzo Efobi, director of financial policy and regulations department of the CBN, disclosed in a circular to all banks and Other Financial Institutions (OFIs) dated August 17, 2022.
CBN had reduced interest rates on intervention loans from 9% to 5% per annum in the first quarter of 2020 to help curtail the impact of COVID-19 on businesses and the Nigerian economy at large.
However, the nation’s almost 20% inflation rate despite efforts to halt price increase has forced CBN to start mopping currency in circulation. One of the initiatives introduced in the last two months was to return interest on intervention loans.
This was announced just two days after the apex bank reviewed upward the minimum interest rate payable on savings deposits from 0.15% to 4.2%, 30% of the Monetary Policy Rate (MPR).
In the last two months, the CBN has risen the interest rate by 250 basis points to 14%, increase interest on intervention loans and raised minimum interest rate on savings deposits to contain inflationary pressure.
Nigeria’s inflation rose to 19.6% in the month of July as the value of the Nigerian Naira took a hit against global currency amid rising demand for the United States Dollar in an economy that depends on imports for most of its consumption.
This pushed prices of imported goods or locally made goods with imported items to a record-high as businesses were forced pass to increase in cost to final consumers.
Private Sector Loans Reaches All-Time High of N37.13 trillion in April – CBN says
The Central Bank of Nigeria (CBN) has said credit to the private sector rose to N37.13tn as of April 2022 as banks increase lending to the real sector to create jobs and expand the country’s Gross Domestic Product (GDP).
The apex bank disclosed in its ‘Money and Credit Statistics’ report. From the year to date, credit to the private sector rose by 5.53% or N1.95 trillion from N35.18 trillion reported in January 2022.
In 2021, credit to the private sector jumped by N5.58 trillion to a record N35.73 trillion.
In the latest report from the central bank, credit to the private sector rose from N35.99 trillion in February to N36.37 trillion in March 2022, representing an increase of 1.07%.
The Monetary Policy Committee (MPC) attributed the growth in private sector lending to the increase in industry funding base and compliance with the 65 percent Loans to Deposit Ratio (LDR) directive.
The CBN also disclosed that it had reviewed the performance of its various interventions to stimulate productivity in manufacturing, industry, agriculture, energy, infrastructure, healthcare, and micro, small and medium enterprises.
The governor of CBN, Mr. Godwin Emefiele, in his statement at the end of March MPC, noted that the growth reflected the continued growth of banking system credits to the private sector supported by the sustained drive of the apex bank to increase lending to high-impact real sector ventures.
He had disclosed that gross credit maintained its upward trajectory since 2019, with an N4.13tn or 19.53 percent growth in industry credit between February 2021 and 2022.
Deputy Governor of Financial System Stability of the CBN, Aisha Ahmad, at the MPC meeting of March 2022 in Abuja, said, “The continued credit growth, particularly to output enhancing sectors, is expected to support economic recovery further. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system from lingering macroeconomic risks.”
Despite Majority’s Refusal To Pay Back, CBN Loans to Farmers Hikes to N1 Trillion
The Central Bank of Nigeria (CBN) has revealed that a sum of N1 trillion in loans has been disbursed to farmers across the country as of April despite the refusal of most beneficiaries to pay back.
Recall that Investors King reported CBN’s outcry over a majority of the farmers who benefited from the Anchor Borrower’s Programme (ABP), but refused to pay back.
Investors King gathered that the majority of the beneficiaries regard the loan as their part of the national cake and they do not have to pay back what they consider theirs as citizens. This attitude made it difficult for other farmers, who also want to access the loan, to benefit from the scheme.
According to figures gathered from the CBN’s Monetary Policy Committee members’ report, “Between January and February 2022, the bank disbursed N29.67bn under the Anchor Borrowers’ Programme for the procurement of inputs and cultivation of maize, rice, and wheat, three crops that hitherto were significant concerns of FX demand.
“These disbursements bring the total under the programme to over 4.52 million smallholder farmers, cultivating 21 commodities across the country, comes to a total of N975.61bn.”
The CBN stated in its most recent MPC report, “Between April and May 2022, the Bank released the sum of N57.91bn under the Anchor Borrowers’ Programme to 185,972 new projects for the cultivation of rice, wheat, and maize, bringing the cumulative disbursement under the programme to N1.01tn, disbursed to over 4.2 million smallholder farmers cultivating 21 commodities across the country.”
In its amended Anchor Borrowers’ Programme Guidelines for September 2021, the CBN’s Development Finance Department stated that insurance coverage should be given under the plan.
According to the instructions “Provide insurance cover for the projects; ensure fast processing and settlement of claims; provide technical advice to farmers on insurance policies; and monitor projects for early warning signals or red flags.
“Render periodic reports on-farm conditions; serve as member of the project management team; and carry out any other responsibilities as may be prescribed by the CBN from time to time.”
The updated rules took into account current realities and advancements in the ABP, with the goal of fostering best practices in program execution.
Smallholder farmers, the ABP transaction dynamics, and the project management team in the implementation phase were all recognized in the publication.
The recommendations, according to the CBN, are aimed at strengthening the program’s implementation process and increasing stakeholder participation in order to achieve the ABP’s goal.
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