- Investors Await N62.4bn Maturing Treasury Bill
Treasury bills maturity of 91-day and 182-day worth N62.4billion are expected to hit the market this week.
However, the maturing fixed income is expected to be offset by a rollover of the same amount while an open market operation (OMO) maturity of N168.1 billion is also expected to hit the system this week.
Analysts at Afrinvest West Africa Limited stated this in a report at the weekend, expressing optimism that the move would impact liquidity dynamics great deal.
But, they held the view that the aggressive liquidity mop-up signal of the Central Bank of Nigeria (CBN), would keep the open buy back (OBB) and overnight rates in check.
Financial system liquidity stayed negative on all trading days of trading last week, owing to increased primary market issuances and the Retail SMIS (Secondary Market Intervention Sales) foreign exchange auction conducted by the CBN during the week.
The CBN mopped up a total of N28.6 billion in OMO sales on four of five trading days of the week which hampered system liquidity. Thus, open buy back and overnight lending rates remained in double digits from the start of the week before rising to 105.0% and 107.8% last Wednesday from 25.0% and 26.3% respectively in the previous trading day. OBB and overnight rates dropped 58.3 percentage points and 55.6 percentage points to 46.7% and 52.2% respectively on Thursday as a result of an OMO maturity inflow of N113.05 billion into the system. Consequently, rates closed at 55.8% and 59.3% on Friday, up 33.8 percentage points and 36.8 percentage points week-on-week respectively.
At the treasury bills segment of the market, the Federal Executive Council approved the issuance of dollar-backed treasury instruments in the international capital market in order to reduce the country’s huge debt profile.
“Whilst we believe that this policy would enable the government to restructure the country’s debt profile by borrowing more in foreign currencies than naira, we expect that this will also drive down government’s borrowing cost while also lengthening the tenor for repayment,” Afrinvest stated.
Nevertheless, the treasury bills market closed bearish last week as average yield across benchmark bills rose 61 basis points week-on-week to settle at 18.5 per cent, owing to tight system liquidity. Average yields dropped at the start of the week, down 18 basis points to 17.7 per cent as investors showed interest in the market. However, yields trended upwards on the remaining days of the week owing to bearish sentiment towards short and medium term instruments. Consequently, average yield across benchmark instruments closed at 18.5 per cent last Friday.
Forex Market Outlook
In the forex market last week, the CBN continued with its weekly intervention in order to boost forex liquidity and keep investors’ confidence upbeat.
The CBN also auctioned US$100 million SMIS last Wednesday for the clearance of the backlog of matured forex obligations for raw materials and machineries, agriculture, airlines, petroleum products, letters of credit and bill for collection.
But at the official market, the naira exchange rate stayed flat at N305.55/$1, while it appreciated 0.4 per cent week-on-week to close the week at N365.91/$1 on the FMDQ NAFEX segment from N367/$1 the preceding week. The interbank NIFEX market also traded within similar level but depreciated 47 basis points to close at N365.20/US$1.00 from N363.49/US$1.00 in the previous week.
Also, the parallel market traded within a tight band with rate remaining unchanged from preceding week’s close of N367/$1.
“We opine that the convergence in rates between the NAFEX and Parallel market shows the high level of investor confidence in the CBN’s FX policy and continues to serve as a representation for the potential impact of the adoption of a full-fledged flexible exchange rate regime.
“In the FMDQ OTC Futures segment, the lukewarm appetite for contracts which has been recorded in recent weeks continued as investor appetite remains dampened by the upward revision of contract prices. During the week, the total value of open contracts marginally increased by US$53.1 million to US$2.6 billion as the NG/US AUG 2017 contract enjoyed the most buy sentiment.
“We believe the stability in the forex market will be sustained in the short to medium term as the CBN continues its drive to boost forex liquidity at the different segments of the forex market. Hence, we expect to see rates at current levels in the coming week,” they added.
Bond Market Review
Performance of the domestic bond market last week was bearish as investors’ interest stayed soft. Average yield stayed flat at 16.8 per cent on Friday, up five basis points week-on-week. Analysts anticipated that this week, yields might trend higher as investors free up positions ahead of the August Bond auction slated for 23rd August, 2017.
Also, across the Nigerian Corporate Eurobonds, performance remained mixed as Tier-1 banks’ bond yields fell while some Tier-2 yields rose. Investor interest was majorly centered on the ZENITH 2022 and 2019 bonds (which fell 17 basis points and three basis points respectively).
As stated earlier, badly weighed down by the debilitating effect of Nigeria’s huge debts, the federal government last Wednesday sought a way out, approving the issuance of dollar-backed Treasury bills even as it extended the maturity period from between 91 and 364 days to two and three years respectively.
The initiative, according to an economic expert, who spoke said it was an impressive policy that would enable the government to restructure the country’s debt profile by borrowing less in naira but more in foreign currencies, explaining that it would bring down interest rate and facilitate the economy’s exit from recession. The federal government also approved the 2018-2020 Medium Term Expenditure Framework and Fiscal Strategy Paper (FSP), pegging oil benchmark at $45 and retaining the prevailing N305/$ exchange rate. The Minister of Budget and National Planning, Senator Udoma Udo Udoma, said the MTEF targeted 3.5 per cent growth rate in 2018, 4.5 per cent in 2019 and 7 per cent in 2020, adding that government projected at 2.3 million barrel per day production volume.
Throwing light on the shift from naira denomination of treasury bills to dollars, the Minister of Finance, Mrs. Kemi Adeosun, said the council approved a memo restructuring the issuance of treasury bills using dollar instruments subject to the approval of the National Assembly. According to her, the extension of the tenor of Treasury bill from the current 91 and 364 days to two and three year period would provide the government with relief from the pressure to repay the debt. She also said the new initiative would reduce government borrowing to $3 billion, create more room for banks to lend money to private investors and consequently force down interest rates.
She explained that issuing the treasury bills in dollar instrument was not synonymous with paying interest in dollars but would instead, provide the government with the opportunity to obtain a bond in the international capital market and pay the debt in a cheaper way.
I & E Window
The importers’ and exporters’ forex window introduced by the CBN about four months ago has attracted $4 billion from foreign investors between April and now, the Bankers’ Committee disclosed last Thursday. This was a $1.8 billion growth over the $2.2 billion recorded in June. The window also posted a single transaction of $240 million on August 1, 2017.
Addressing reporters in Abuja Thursday at the end of its 34th meeting, the Bankers’ Committee said the economy was on the recovery path and on the verge of exiting the recession, going by various indicators.
The Director, Banking Supervision of the CBN, Mr. Ahmed Abdullahi; Managing Director, Union Bank of Nigeria Plc, Mr. Emeka Emuwa; Managing Director, FSDH, Mrs. Hamba Amba; and Executive Director, Standard Chartered Bank, Mrs. Mobola Faleye, addressed the press.
The committee noted that the FX market has continued to record positive gains, with the various exchange rates in the market nearing convergence.
Access Bank Enters Into Definitive Agreement With Cavmont Capital
Access Bank Signs Definitive Agreement With Cavmont Bank Ltd
Following July 8, 2020 announcement, the Board of Access Bank Plc on Thursday said its subsidiary, Access Bank Limited (Zambia) has entered into a definitive agreement with Cavmont Capital Holdings Zambia regarding the acquisition of Cavemont Bank Ltd.
In the statement released through the Nigerian Stock Exchange, the bank said the proposed acquisition will position Access Bank as one of the top 10 banks in Zambia and improve the bank’s momentum to advance its strategic objectives.
The bank said “This is a highly complementary transaction, combining ABZ’s wholesale and trade finance capabilities with Cavmonth Bank’s retail and commercial banking operations. Customers of the enlarged bank will benefit from greater security offered by what will be one of the most capitalised banks in Zambia with a more diversified product and service offering and a broader geographical footprint and infrastructure. The enlarged bank will be well-placed to participate in the long-term economic growth of Zambia, predicated on the country’s vast reserves of natural resources and fast-growing young population.”
The transaction agreement showed Access Bank Zambia will acquire the entire issued share capital, assets and liabilities of Cavmonth Bank while Capricorn Group Limited, majority shareholder of Cavmonth Capital Holdings, will invest around $16.5 million or ZMW300 million of preference shares into Access Bank Zambia.
According to the bank, the transaction is expected to be completed in the fourth quarter of 2020.
Speaking on the transaction, Herbert Wigwe, the Group Managing Director, Access Bank Plc, said “Access Bank is focused on building the scale needed to become a leading bank in its key operating markets through leveraging the right partnerships. This transaction underscores our approach and is another stepping stone towards delivering on our strategic aspirations of becoming the World’s Most Respected African Bank and Africa’s Gateway to the World. It will strengthen our presence in Zambia, while furthering our footprint for growth in the COMESA region, Africa’s largest free trade area.
“Over the years, we have worked hard to build a sustainable international bank of African origin that can expand the potential of businesses, support economic prosperity, facilitate trade and investment and extend the power of banking to millions of people who do not yet have the financial tools to achieve their dreams. This proposed transaction aligns with that strategy”.
Thinus Prinsloo, Managing Director of Capricorn Group, also said: “Access Bank is an African banking group with an impressive growth trajectory and geographic reach across Africa and internationally. This transaction is an excellent strategic fit with Cavmont Bank’s presence in Zambia and will strengthen the capital base from which to achieve long-term sustainable growth. Zambia is an economy with th potential that is poised for a robust recovery, and this combination best positions the combined bank to harness these opportunities“.
Peet van der Walt, the Managing Director of Cavmont Bank, explained that: “Cavmont Bank’s vision is to be a world-class bank, rated amongst the best in Zambia. This proposed merger with Access Bank Zambia accelerates our strategy and positions us as a top ten bank in the country. As a subsidiary of one of the largest banking groups in Africa, Access Bank Zambia has the scale, capabilities and ambition to enable the combined bank to pursue exciting strategic opportunities in Zambia.
“Our customers will benefit from greater security offered by one of the most capitalised banks in the country, increased scale in Zambia, access to a broader digital and retail offering, and a geographic network across the continent. We look forward to working closely with Access Bank to deliver the benefits of the merger to all the stakeholders.” Shareholders should note that the cautionary announcement dated July 8, 2020 is hereby withdrawn and shareholders are no longer required to exercise caution when dealing in the group’s shares in relation to the potential transaction.”
FIRS Says All Illegal Stamp Duty Fees Collected By NIPOST Will Be Recovered
‘All Illegal Stamp Duty Fees Collected By NIPOST Will Be Recovered’ Says FIRS
The Federal Inland Revenue Service (FIRS) has responded to the allegation levied against its body by the Nigerian Postal Service (NIPOST) over the printing and sales of Stamp Duty to the public.
FIRS Nigeria, in a tweet titled ‘‘That Vexed NIPOST Tweet by Mrs. Maimuna Abubakar’’ responded to an earlier tweet by Maimuna Abubakar, the chairperson, NIPOST.
FIRS stated that normally it would not have responded to the tweet but given the sensitivity of the situation, it must, therefore, respond in order not to mislead the public.
Part of the Tweets read “NIPOST is a government parastatal established by Decree 41 of 1992 with the function to *develop, promote, and provide adequate and efficiently co-ordinated postal services at reasonable rates*.”
“This function is clearly contrary to the claim by NIPOST over the administration of stamp duties in Nigeria. On the other hand, the FIRS is the sole agency of government charged with the responsibility of *assessing, collecting, and accounting for all tax types including Stamp Duties*.”
FIRS, therefore, said all illegal funds collected by NIPOST for stamp duty will be recovered to the last kobo in line with President Muhammadu Buhari’s inaugurated Inter-ministerial committee, on the recovery of stamp duties from 2016 till date.
The tweet also noted that “In addition, anyone found culpable of misappropriating the funds in the said illegal NIPOST Stamp Duties Account would be made to face the law as provisioned by the country’s statute books.’’
‘‘The public is hereby reminded that we at the FIRS are resolute in our resolve to safeguard national interests and not any personal ego or interest as NIPOST officials appear to carry on lately.’’
A recap to what Mrs. Maimuna Abubarka tweeted on Sunday August 2, 2020 on her twitter handle at @reg_ng. says that “I am worried for NIPOST, having sleepless night because of NIPOST, we need the general public to come to our aid, FIRS stole our mandate FIRS are now selling stamps instead of buying from us.’’
“What is happening, are we expected to keep quiet and let FIRS kill and bury NIPOST? We need to get our mandate back.”
“NIPOST are the sole custodians of national stamps, another agency printing and selling stamps is against the law/ of the land.”
Abubakar also added that “FIRS did not only steal our stamps but also our ideas, what NIPOST had worked for since 2016, our documents, patent and sneaked everything into finance bill and tactically removed the name of NIPOST.’’
“I like to make this clear, NIPOST is the only agency charged with the responsibility of producing adhesive stamps and revenue for the for the purchase of such stamp accrues to NIPOST.”
“There is no where in FIRS act or stamp duty act where it’s so stated that FIRS can produce stamp or sale stamp.”
FCMB Grows Profit by 29 Percent to N9.7bn in H1 2020
FCMB Posts 29 Percent Increase in PAT to N9.7bn in H1 2020
FCMB Group Plc has said its profit before tax expanded by 26 percent in the first half of the year ended June 30, 2020.
The lender grew profit before tax from N8.8 billion reported in the same period of 2019 to N11.1 billion in the period under review.
The lender disclosed this in a statement on “FCMB Group records impressive half year results as profit before tax rose by 26 per cent to N11.1bn,” released on Tuesday.
Profit after tax grew by 29 percent year-on-year to N9.7 billion in the first half of the year despite the COVID-19 pandemic.
This, according to the lender, translated to a 9.4 percent return on average equity and 49 kobo earnings per share, an increase of 16 percent and 29 percent year-on-year, respectively.
It explained that FCMB Group comprises of commercial and retail banking (First City Monument Bank Limited, Credit Direct Limited, FCMB (UK) Limited and FCMB Microfinance Bank Limited).
The statement noted that the Group has corporate & investment banking (the Corporate Banking Division of the Bank, FCMB Capital Markets Limited and CSL Stockbrokers Limited).
Also, the Group owned the asset & wealth management arms (FCMB Pensions Limited, FCMB Asset Management Limited and FCMB Trustees Limited).
FCMB said, “The half year results also showed that the group recorded an increase in gross revenue by nine per cent to N98.2bn as against N89.8bn for the same period last year.
“Net interest income equally rose by 17 per cent for the first half of 2020 to N45.4bn from N38.7bn posted in the first half of 2019, while non-interest income stood at N17.5bn, an increase of 14 per cent compared to N15.3bn within the six months period last year.”
Lender’s loans and advances rose by 29 percent year-on-year during the period under review and four percent on a quarterly basis to N794.6 billion.
Accordingly, customer deposits jumped up by 28 percent year-on-year to N1.1 trillion in the first half of the year.
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