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Bond Issuance Slumps to Six-year Low

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  • Bond Issuance Slumps to Six-year Low

Sovereign bond issuance by African nations including Nigeria plunged to its lowest level since 2010 as buyers pushed up yields and proposed new borrowing plans.

Stripping out South Africa, sub-Saharan nations managed to get only one hard-currency bond last year, Financial Times reported.

Even that, a five-year $750m bond issued by Ghana in September, had to be scaled down from plans to borrow $1bn over 10 years amid buyers’ fears that the west African state would wrestle to meet its fiscal targets.

This compares poorly with the interval from 2013 to 2015, when sub-Saharan states (excluding South Africa) issued 21 greenback bonds, elevating a complete of $18bn, accordance to a report by Exotix Partners.

The Head of Analysis at Exotix, Stuart Culverhouse, said final year’s weak issuance was largely due to a weak exterior backdrop, with low commodity costs and tepid enthusiasm for rising markets among worldwide buyers.

This resulted in a “large dislocation in yields,” which surged past 12 per cent for African commodity exporters, earlier than falling again to round eight per cent later within the year.

“Loads of nations most likely couldn’t afford to difficulty. The solely nations that would most likely didn’t need to,” Culverhouse said.

The sub-Saharan Economist at Renaissance Capital, Yvonne Mhango, said one other issue behind the issuance drought was that many nations were trying to implement fiscal consolidation.

“If you’ve got nations which have been requested to rein of their spending then it implies that the necessity to increase additional funding falls,” Mhango said.

The Head of Rising Market Sovereign Analysis at BlueBay Asset Management, Graham Stock, said the shortage of an IMF programme triggered buyers to shun Zambia’s overtures, whereas oil producers, reminiscent of Angola, had been out of favour amid low international costs.

“We had various oil producers that may have issued final year however are nonetheless struggling to exhibit that they’ve their funds suitably adjusted to handle increased debt ranges,” Stock said.

He added, “Last year was uncommon in that there weren’t many governments that wanted difficulty and those that may have appreciated to have carried out so weren’t ready to accomplish that.”

He forecasts that a pick-up in issuance this year from the likes of Zambia (assuming it does enter an IMF programme), Kenya and oil producers reminiscent of Nigeria, Angola and Gabon, as their funds enhance in step with recovering crude costs.

“I believe the markets can most likely take in that,” he said.

Mhango also believes the country will attempt to borrow this year, given that it is among the comparatively few main nations within the area with an expansionary price range.

Kenya is one other chance, she said, adding that it could go for a syndicated mortgage as an alternative.

However, Mhango was sceptical that the funds of most commodity producers had improved sufficient to help issuance at a yield they’ll afford, given a backdrop of the rising United States rates of interest.

Culverhouse warned that the times when African nations might borrow at charges of five to six per cent, as Zambia, Nigeria, Kenya, Ivory Coast and Namibia all did between 2012 and 2015, “have most likely gone.”

However, Stock said that the truth that a wave of 10-year bonds issued in 2007 and 2008 at the moment were approaching maturity meant governments would probably be eager to refinance.

Moreover, the timing could also be propitious he said, adding that with nations reminiscent of Argentina, Colombia, the Dominican Republic, Turkey and the Philippines, sometimes rated triple or double-B, presently available in the market, Stock added, “The subsequent transfer may be to see extra issuance from the best yielders, reminiscent of these in Africa,” he said.

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.

Finance

Investors Oversubscribed for FGN Bonds by N205.87 Billion in October

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FG October Bonds Oversubscribed by N205.87 Billion

The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.

The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.

Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.

The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.

The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.

The amounts allotted for each of the bids were N20bn and N25bn respectively.

According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.

However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.

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Lafarge Africa Sustains Growth in Third Quarter, Reports N53.3bn Revenue

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Lafarge Africa

Lafarge Africa Grows Revenue by 31.4 Percent to N53.3bn Revenue in Q3 2020

Lafarge Africa Plc, a cement manufacturer headquartered in Lagos, sustained its strong growth in the third quarter (Q3) ended September 30, 2020.

In the company’s financial results released on the Nigerian Stock Exchange on Friday, the cement manufacturer’s revenue rose by 31.4 percent from N45.172 billion posted in the third quarter of 2019 to N59.337 billion in the third quarter of 2020.

Similarly, operating profit grew by 7.2 percent from N7.746 billion in the corresponding quarter to N8.302 billion in the quarter under review. This strong performance continues across the board as net income expanded by 2.8 percent to N4.867 billion, up from N4.734 billion posted in the third quarter of 2019.

Lafarge earnings per share rose by 2.8 percent to 30 kobo in the third quarter, again up from the 29 kobo posted in the same period of 2019.

On the outlook for the company going forward, the company said:

 Market demand is expected to remain strong in Q4.
 Naira devaluation and inflation remain a concern in Q4.
 The implementation of our “HEALTH, COST & CASH” initiatives would continue to deliver
improvement in our performance.
 We will maintain a healthy balance sheet.

Speaking on the company’s performance, Khaled El Dokani, CEO, Lafarge Africa Plc, said “Our robust results for the first 9 months reflect the strong recovery of the demand in Q3 and the successful implementation of our “HEALTH, COST & CASH” initiatives. Both have delivered considerable improvement in recurring EBIT, net income and free cash flow, despite the impact of the COVID-19 pandemic and Naira devaluation, particularly in Q3.

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Despite COVID-19 Pension Assets Hit N11.4 Trillion

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Total Pension Assets Expand to N11.35 Trillion

The National Pension Commission has revealed that the total pension assets rose to N11.35 trillion as of the end of August 2020 despite the COVID-19 pandemic that disrupted businesses and economic productivity.

According to the latest figures from the National Pension Commission,  the commission assets expanded from N11.08 trillion in June 2020 to N11.3 trillion in July.

The report noted that 66.27 percent or N7.51 trillion of the funds had been invested in the Federal Government’s securities.

While some of the funds were also invested in domestic and foreign ordinary shares, corporate debt securities, local money market securities and mutual funds.

In the commission’s second quarter (Q2 2020) report, it said that following “the issuance of demand notices to some defaulting employers whose outstanding pension contribution liabilities had been established by recovery agents, 16 of the affected employers remitted N261.33 million during the period.

“PenCom said this represents a principal contribution of N152.79 million and penalty of N108.54 million during Q2 2020.”

In the commission’s Q2 2020 report, it said “the pension fund administrators (PFAs) 2,839 contributors under the micro pension plan, remitted a total of N7.4 million to the RSAs as pension contributions.

Also in the same quarter, it said the PFAs recaptured 56,990 RSA holders and uploaded their data to the enhanced contributory registration system (ECRS).

PenCom further said the growth in the industry’s membership was driven by the RSA scheme, which had an increase of 41,147 contributors, representing 0.46 percent.

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