Finance

FGN Savings Bond to Debut Tomorrow

Published

7 years ago

March 12, 2017

FGN Savings Bond to Debut Tomorrow

The Federal Government through the Debt Management Office (DMO) will tomorrow record another milestone in the capital market with the debut of the Federal Government of Nigeria (FGN) Savings Bond. The offer, available exclusively on the Nigerian Stock Exchange, will be opened for five days effective Monday, March 13, 2017 and will be issued monthly thereafter. To ensure a successful take-off, DMO has accredited 87 stockbroking firms of the Nigerian Stock Exchange to market and distribute the Savings Bond.

The retail product will be issued monthly in tenors of two and three years, with quarterly payment of interest to investors. The minimum subscription amount is N5, 000.00 with additions in multiples of N1,000.00, subject to a maximum of N50,000,000.00. The bond is backed by the full faith and credit of the federal government. With a T+3 transaction settlement cycle, the bond, amongst several objectives was purposed to deepen the national savings culture, provide opportunity to all citizens irrespective of income level to contribute to National Development, enable all citizens participate in and benefit from the favorable returns available in the capital market and more importantly diversify funding sources for the government. A brokerage account is, however, required to participate in this bond programme.

The debut of this savings bond puts Nigeria in the league of sovereigns like Sweden, Thailand, Slovenia, Indonesia, United States, and United Kingdom with savings bond. Already, capital market operators are excited about the product and believe it would give fillip to the capital market particularly that has witnessed many retail investors depart since the downturn. Prior to now, the bond market is predominantly available to high networth investors to the detriment of low income investors. With the entry level for the savings bond, even students can afford to play in the space.

In an exclusive chat, Executive Director, Capital Market, NSE, Haruna Jalo-Waziri, said, “NSE Retail Bond Market was launched in 2012 with the aim of providing retail investors access to high quality debt instruments, as well as afford them portfolio diversification opportunities in an efficient and reliable way. The Launch of the Federal Government National Savings Bonds is consistent with the NSE’s commitment to grow domestic investor participation in the Nigerian Capital Market, and it is our pleasure to have worked with the DMO and the dealing member community to deliver yet another innovative product that will foster financial inclusion in Nigeria. After the offer closes, the bond will be listed on the NSE and can be traded on our Retail Bonds Market. DMO Accredited Distribution Agents and the Government Broker will provide liquidity by continuously making 2-way quotes throughout the trading session”

With an estimated population in excess of 150million, if the targeted audience successfully offtake this product, we shall be seeing yet another paradigm shift where ordinarily Nigerians irrespective of their income levels can pool resources to boost government’s effort to mobilise domestic capital required to fund priority sectors of the economy and ultimately serve as a catalyst for economic growth.

Tomorrow’s savings bond offer is coming on the back of recent innovative capital market instruments deployed by the federal government. Last week, it listed the first FX denominated bonds, Eurobond, on local bourses NSE and FMDQ to the delight of many capital market watchers. The bond, which was issued under Nigeria’s newly established Global Medium Term Note programme, is the third in the series after the ones in 2011 and 2013. The Notes will bear interest at a rate of 7.875 per cent and will mature on February 16, 2032, with a bullet repayment of the principal. The Eurobond is part of FGN’s funding strategy for its 2016 capital expenditure plan and will be utilised to fund key infrastructure projects, in line with its economic plan. With the minimum denomination to participate set at US$200,000 and increment of US$1000, only the medium to high income level investors could subscribe to the bond offer.

Speaking at the listing on NSE, the bourse’s Executive Director, Market Operations and Technology, Mr. Ade Bajomo, commended the DMO for listing the Eurobond on the nation’s bourse. He noted that the domestic listing would diversify its investors’ base by giving Nigerian institutional investors access to the bond.

Bajomo further remarked that, “The listing of the dollar-denominated bond on the exchange will boost price discovery and liquidity in the local market as well as help attract reliable long-term foreign currency denominated funds into the financial market. It will also set the foundation for raising and listing more foreign denominated securities in Nigeria which will open up additional capital raising options for issuers and portfolio diversification opportunities to investors”.

Going by the earlier commitment of the former Minister of Environment, Mrs Amina J. Mohammed, players in the capital market will yet have another product, the sovereign green bond join the list for discerning investors to put their funds in projects that supports sustainable projects to enhance living, protect our climate and environment. Last month, this aspiration received a boost from participants when the federal government met with investors and capital markets operators in Lagos for the first-ever Green Bonds Conference themed “Green Bonds: Investing in Nigeria’s Sustainable Development” and organised by the Federal Ministry Environment in collaboration with Federal Ministry of Finance and Debt Management Office. The event was headlined by the Acting President Yemi Osinbajo. Proceeds from the green bonds will fund identified projects in energy, agriculture, transport (FCT) and environment with international investors and business leaders expected to lead at the event.

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Samed Olukoya

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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Pension

PFAs Posted Decent Growth – Coronation Economic Note

Published

11 hours ago

May 6, 2024

Samed Olukoya

According to the latest monthly report released by Nigeria’s Pension Commission (PENCOM), the assets under management (AUM) of the regulated pension industry increased by +26.2% y/y to N19.7trn.

Meanwhile on an m/m basis, the AUM decline marginally by -0.5%.

This marks the first decline since September ’22. Notably, FGN debt securities accounted for 62% of the total AUM in March ’24. Meanwhile, other asset classes such as private equities, real estate, and infrastructure funds, accounted for 0.4%, 1.4%, and 0.8% of total AUM, respectively.

Total FGN debt securities held by the Pension Fund Administrators (PFAs) increased by +19.7%
y/y but declined marginally by -1.4% m/m.

Specifically, we note that the FGN bond instruments held by the PFAs increased by +17.2% y/y to N11.5trn, but declined by -2.4% m/m, on the back of a 10-year tenure FGN bond maturity (N719.9bn). The FGN bonds account for 58% of the total AUM.

FGN bonds remain attractive due to its lower risk profile and elevated yields. It is worth noting that the average FGN bond yield increased by +219bps m/m as at end-March ‘24.

The PENCOM report shows that NTBs held by PFAs grew by +120% y/y and increased by +42.5% m/m to N407.6bn in March ’24. We note that the average NTB yield increased by +250bps m/m as at end-March’24.

This asset class accounted for just 2.1% of the total AUM in the same month.

Meanwhile, State government securities held by the PFAs increased by 64.1% y/y to N266.2bn in March ‘24.

It is worth highlighting that domestic equity holdings surged by 99.6% y/y and 8.7% m/m to N2.1trn in the same period, accounting for 10.6% of the total AUM in March ‘24 compared with 9.7% in February ’24. The NGX-all-share index (NGX-ASI) rose by +90.6% y/y and +4.6% during the same period.

Furthermore, YTD (28-March ’24) return on index rose by +18.1% to close at 39.8% from 33.7% in February ’24.

Recently, the market has shown a bearish trajectory as the NGX-ASI declined by -6.1% m/m as at end-April ‘24, partly, on the back of relatively weak corporate earnings amid inflationary conditions. Given expectations of higher yields in the fixed income market on the back of continuous tightening or a hold stance of the CBN at the next MPC meeting, PFAs are likely to reallocate a greater portion of pension assets to fixed income securities.

According to PENCOM, the total pension contributions since inception remitted to the Individual Retirement Savings Account (RSA) increased by +17.3% y/y to N9.9trn as at end-December ‘23 compared with N8.5trn recorded as at end-December ‘22. Remittance from the public sector accounts for 52%, while private sector accounts for 48% of the total pension contributions.

This can be partly attributed to improvement in the efforts to expand pension coverage.

Notably, PENCOM added a total number of 8,927 micro pension contributors in Q4 ’23 bringing the total number of registered MPCs in the Micro pension plan from inception to 114,382 as at end-December ’23 from 89,327 as at end-December ’22.

Banking Sector

GTCO Plc’s Profit Before Tax Grows by 587.5% to N509.35 Billion in Q1, 2024

Published

13 hours ago

May 6, 2024

Samed Olukoya

GTCO Commemorates Listing on Nigerian Exchange - Investors King

Guaranty Trust Holding Company (GTCO) Plc, one of Nigeria’s leading financial institutions, has unveiled its first quarter (Q1) financial results for the period ending March 31, 2024.

According to the report submitted to the Nigerian Stock Exchange (NGX), GTCO recorded a 587.5% growth in profit before tax (PBT) to N509.35 billion.

This substantial increase in pre-tax profit represents a significant jump from the N74.089 billion reported in the corresponding period of the previous year.

The financial statement also revealed a 227.93% rise in income tax to N52.213 billion, compared to N15.922 billion in the same period of 2023.

As a result, GTCO’s profit after tax (PAT) for the first quarter of 2024 rose to N457.134 billion, an exceptional growth of 685.9% from N58.167 billion recorded in the first quarter of the previous year.

The strong performance of GTCO can be attributed to several key factors. The Group’s loan book increased by 21.9% rising from N2.48 trillion recorded in December 2023 to N3.02 trillion by March 2024.

Similarly, deposit liabilities grew by 26.0% from N7.55 trillion in December 2023 to N9.51 trillion in March 2024.

Despite the challenging economic environment, GTCO’s balance sheet remained well-structured, diversified, and resilient.

Total assets closed at an impressive N13.0 trillion while shareholders’ funds stood solid at N2.0 trillion.

Commenting on the outstanding financial results, Mr. Segun Agbaje, the Group Chief Executive Officer of Guaranty Trust Holding Company Plc, expressed optimism about the future.

He said the robust performance across all business verticals reaffirmed the value of the Holding Company Structure.

“Our first quarter results reflect the unfolding value of what we have created in all our business verticals through the Holding Company Structure – from Banking and Payments to Funds Management and Pension,” said Mr. Agbaje.

“We are positioned to compete effectively on all fronts and fulfill all our customers’ needs under a unified, thriving financial ecosystem.”

The growth in profitability underscores GTCO’s resilience, strategic focus, and unwavering commitment to delivering superior value to its stakeholders amidst evolving market dynamics.

As the Group continues to leverage its strengths and innovative capabilities, it remains well-positioned to navigate the ever-changing landscape of the financial services industry with confidence and resilience.

Banking Sector

UBA Plc Reports 166% Surge in Q1 Profit to N143 Billion

Published

14 hours ago

May 6, 2024

Samed Olukoya

United Bank for Africa (UBA) Plc has made a significant leap in its financial performance, reporting a 166% surge in its first-quarter profit to N143 billion.

The details, disclosed in the financial services group’s unaudited report for the first quarter, showed a robust growth trajectory despite challenging market conditions.

This surge translates to a 169.4% year-on-year increase in earnings per share (EPS) to N3.96 in the first three months of the year, up from N1.47 reported in the same quarter of 2023.

According to the financial results, interest income rose by 129.7% year on year to N440.76 billion. The bank also witnessed a significant uptick in investment, reporting a 147.1% year-on-year growth.

UBA’s interest expense saw an increase of 93.9% year on year to N140.09 billion. This was attributed to higher costs incurred on deposits from customers, deposits from financial institutions, and borrowings.

Despite this, customers’ deposits grew by 112.6% year on year to N18.38 trillion.

Net interest income also grew by 151.3% year on year to N300.68 billion from about N120 billion in the previous year.

Furthermore, non-interest income advanced by 38.9% year on year to N77.91 billion, fueled by expansions in net fees and commission income and net FX trading income.

At the end of Q1, UBA’s operating income stood at N373.31 billion, a 122.5% year-on-year increase.

However, operating expenses saw an uptick of 104.1% year on year, driven by expansions in employee benefits, regulatory costs, and inflationary pressures.

Despite these challenges, the group’s profit-before-tax surged by 154.7% year on year to N156.34 billion from N61.37 billion a year ago.

Net profit also increased by 166.1% year on year to N142.58 billion from N53.59 billion in the previous year.

UBA’s stellar performance in the first quarter underscores its resilience, strategic positioning, and commitment to delivering value to shareholders amid evolving market dynamics. As the bank continues to navigate challenges and seize opportunities, it remains poised for sustained growth and value creation in the financial services sector.