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Nigerian Banks Loss N372B in Equities

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Banking stocks suffered the most among 25 top losers in the equities’ market as share price decline left investors with a net capital loss of N372 billion.

There were 10 banking stocks among the top 25 that lost 30 per cent and above in the past eight months. Some of the top losers recorded as much as 60.1 per cent in equities price reduction.

Conversely, only one banking stock made the few top gainers’ within the period. Altogether, there are 15 banking stocks quoted on the Nigerian stock market.

Three other banking stocks recorded various gains, while a bank dropped by 12.3 per cent.

Investors in banking stocks have suffered the highest losses with nearly three-quarters of quoted banking stocks running with double-digit losses. Losses in the banking sector generally significantly outweighed the overall market’s average loss, according to data review by The Nation.

The benchmark indices for the Nigerian stock market indicated eight-month average decline of 3.64 per cent, equivalent to a loss of N372 billion. Aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) closed August at N9.479 trillion as against its year’s opening value of N9.851 trillion. The All Share Index (ASI), which tracks prices at the Exchange, dropped to 27,599.03 points by the month-end as against its year’s opening index of 28,642.25 points.

Banking stocks were deep in the red with the troubled Skye Bank leading the top 25 losers with year-to-date loss of 60.13 per cent. The Central Bank of Nigeria (CBN) had sacked the board and management of Skye Bank over corporate governance issues. Diamond Bank followed with a loss of 54.35 per cent. Other top losers in the banking sector included Ecobank Transnational Incorporate, -31.3 per cent; Fidelity Bank, -40.67 per cent; Sterling Bank, -49.18 per cent; Union Bank of Nigeria, -39.13 per cent; Unity Bank, -30.36 per cent; Wema Bank, -34.0 per cent; FBN Holdings, -40.53 per cent and FCMB Group, which market value had dropped by 39.64 per cent. Stanbic IBTC Holdings meanwhile dropped by 12.3 per cent within the period.

While consolidation, steep price declines and emergence of highly capitalised non-bank stocks such as Dangote Cement had reduced the hitherto overwhelming dominance of the market by banking stocks, banking stocks still account for some 25 per cent of the total market value of the Nigerian equities market.

Head, financial advisory group, GTI Capital Group, Mr. Kehinde Hassan, said the negative performance of the banking sector was weighing heavily on the overall market performance.

He noted that the unstable policy environment and the knee-jerk approach of the Central Bank of Nigeria (CBN) to regulatory decisions have compounded the tough operating environment for banks, many of which had warned of lower earnings due to the headwinds.

Only Guaranty Trust Bank (GTB) ranked within the top gainers’ list with 8-month gain of 45.76 per cent. United Bank for Africa (UBA) meanwhile posted a heartwarming return of 28.7 per cent. Access Bank followed with 14 per cent while Zenith Bank, against all expectations, trailed with a modest gain of 6.05 per cent.

Other top losers for the period included Livestock Feeds, -33.1 per cent; UACN Property Development Company, -42.5 per cent; Honeywell Flour Mills, -35.12 per cent; Vitafoam Nigeria, -43.99 per cent; AIICO, -30.77 per cent; Union Homes and Savings, -39.24; Fidson Healthcare, -32 per cent; GlaxoSmithKline Consumer Nigeria, -45.88 per cent; Berger Paints, -31.1 per cent; Cement Company of Northern Nigeria, -35.8 per cent; Lafarge Africa, -40.1 per cent; Portland Paints and Products Nigeria, -53.2 per cent; Forte Oil, -47 per cent; Tourist Company of Nigeria, -43.1 per cent and Caverton Offshore Support Group, which lost 40.9 per cent.

Nigerian equities have writhed under sustained losses in the past 32 months. Aggregate market value of all quoted equities on the NSE closed 2015 at N9.851 trillion as against its opening value of N11.478 trillion for the year, representing a loss of N1.627 trillion. The ASI indicated a negative full-year average return of -17.36 per cent. The ASI closed 2015 at 28,642.25 points as against its opening index of 34,657.15 points.

The losses in 2015 worsened the downtrend that had in 2014 marked out Nigerian equities among the worst-performing stocks globally with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities had closed 2014 at N11.478 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year.

Altogether, investors have lost more than N3.75 trillion in the past 32 months as the stock market groaned under political tension, steep decline in crude oil prices, foreign exchange crisis, uncertain policies and other domestic and global macroeconomic concerns.

The second half of 2016 has however seen considerable share price recovery compared with the steep losses in the first half. In the first quarter alone, Nigerian equities had recorded a net loss of N1.15 trillion.

Notwithstanding the negative overall market situation, many stocks have posted substantial returns so far this year. Dangote Flour Mills, which saw the reemergence of Aliko Dangote’s Dangote Industries Limited as the core investor, recorded the highest gain of 240.7 per cent. E-Tranzact followed with a gain of 97.4 per cent. United Capital returned 74.8 per cent while Total Nigeria posted eight-month return of 63.3 per cent. Other top gainers included Presco, 37.2 per cent; AG Leventis, 43.6 per cent; Union Dicon Salt, 39.3 per cent; Neimeth International Pharmaceutical, 32.6 per cent; DN Meyer, 30 per cent; Seplat Petroleum Development Company, 49.4 per cent; Eterna, 33.7 per cent and RAK Unity, a second-tier stock that posted a year-to-date return of 61.3 per cent.

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

CBN Reduced Interest Rate by 100 Basis Points to 11.5%

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CBN-Led Monetary Policy Reduces Benchmark Interest Rate to 11.5%

The Central Bank of Nigeria led Monetary Policy Committee (MPC) on Tuesday lowered the official interest rate by 100 basis points from 12.5 percent to 11.5 percent to stimulate growth and ease access to funds for businesses in the real sector.

The MPC had refused to reduce the interest rate from 12.5 percent despite the COVID-19 negative impacts on businesses and the economy at large. However, the change in tone may not be unconnected to the severity of Nigeria’s economic situation following a series of negative economic data from the National Bureau of Statistics (NBS).

Nigeria’s economy contracted by 6.10 percent in the second quarter while the unemployment rate rose to 27.1 percent or 21.8 million people and inflation hovering above 13 percent. This was after the apex bank adjusted the nation’s exchange rate twice to accommodate falling foreign reserves and discourage capital flight by most foreigners looking to exit the economy as uncertainties jumped to a record-high.

Still, with fast falling consumer spending amid huge unemployment numbers, the new monetary policy rate may not be effective as businesses need demand to thrive, a situation Nigeria may not experience in the near-term given recent increases in electricity tariff, petrol pump price and Value Added Tax.

Again, while Nigerians are being taxed to death and forced to pay more even with the decline in the value of the Naira, the same people are expected to patronise and sustain businesses without jobs.

The committee retains Cash Reserve Ratio at 27.5 percent while the liquidity ratio stood at 30 percent and the asymmetric corridor from +200/-500 around the MPR.

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Healthcare Startups Raised $111.4bn in Total Funding, a 34% Jump Year-on-Year

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Startups in the Healthcare Sector Raises $111.4bn in Funding

The coronavirus pandemic put enormous pressure on the healthcare industry, forcing pharmaceutical giants and institutions to roll out clinical trials for a COVID-19 vaccine at breakneck speed. But behind the COVID-19 outbreak as the main healthcare issue in 2020, large health systems and venture capital firms continued investing millions in startups whose products could bring critical healthcare delivery innovation.

According to data presented by Buy Shares, UK, the total amount of funds healthcare startups raised over time hit $111.4bn in September, a 34% jump year-on-year.

Total Funding Amount Surged by 162% in Three Years

In 2015, healthcare startups worldwide raised $5.4bn in funding rounds, with the cumulative value of investments reaching $24.4bn that year, revealed the CrunchBase data. During the next two years, this figure surged by more than 68%, reaching $45.5bn in the fourth quarter of 2017.

Statistics show that 2018 delivered a $19.2bn of investments into healthcare startups, while the cumulative funding value rose to $64.7bn. In 2019, the total value of raised funds jumped by $24.7bn to $89.4bn, the most significant increase year-on-year.

The Crunchbase data revealed the first quarter of 2020 delivered $7.1bn worth investments into healthcare startups, a 51% increase year-on-year. Between April and June, the cumulative value of funding rose to $103.7bn and continued growing. Statistics show the total funding amount healthcare startups raised over time surged by 162% in the last three years.

Analyzed by geography, North America represents the leading region with $72.4bn of investments in healthcare startups. The US companies raised more than 97% of that amount, with California and San Francisco as the leading hubs. Asian startups hit $25.5bn in total funding, ranking as the second-leading region globally. European healthcare startups follow with $12.8bn worth funding rounds.

Three Largest Funding Rounds in 2020 Worth Over $2bn

The CrunchBase data also revealed the three largest healthcare startup funding rounds this year hit over $2bn value.

Last month, JD Health, the healthcare unit of Chinese e-commerce giant JD.com, raised more than $830 million from Hillhouse Capital in Series B funding, the largest investment in 2020. The company announced it would use this capital to further strengthen its pharmacy supply chain capabilities and explore additional healthcare services opportunities in the broader healthcare sector.

In July, Seattle-based biotech startup Sana Biotechnology raised $700 million in initial financing that will be used to advance the company’s discovery and development programs that deliver engineered cells as a treatment for different types of diseases.

Statistics show that Lyell Immunopharma`s $493 million worth Series C funding round represents the third-largest healthcare startup investment in 2020. Last year, the San Francisco-based company joined forces with GlaxoSmithKline plc to develop new technologies to improve cell therapies for cancer patients.

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FinCEN Leaks: Tone Down The Rhetoric and Focus on Improving Banking Checks

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Banks Must do More To Prevent Financial Crime

The FinCEN leaks underscore that banks must do much more to prevent financial crime, but also that a clear distinction must be made between legal and illegal financial practices.

This is the message from Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations, as more than 2,500 documents from the U.S. Financial Crimes Enforcement Network raise concerns about what banks’ clients might be doing.

Mr Green says: “These documents show how some of the world’s biggest banks have seemingly turned a blind eye to criminals moving dirty money around the world through their systems.

“For me, this highlights once again that these major financial institutions need to do much more and with vigour to help prevent high-level financial crime, which is a serious global problem.

“It brings up the issues of independent verification and conflict of interest within banks. Should a bank with a financial interest be allowed to make the decision on moving such large figures?

“A bizarre anomaly is that it appears that smaller amounts are often questioned, but larger figures often appear not to be.”

He continues: “Whilst banks must, evidently, do much more in this area, it is also important to make clear the distinctions between legal and illegal financial practices.

“A failure to do so muddies the waters and makes combatting financial crimes harder.

“For instance, some high-profile individuals have been accused of wrongdoing when their actions and decisions were legal at the time.

“The notion that they are ‘getting away’ with investments that were perfectly legal when they were made is, frankly, ludicrous and wholly unhelpful.

“Knowing this, some have accused these individuals of being ‘immoral’. However, the law is not supposed to be a moral issue.

“It might very well be the case that the laws need to be overhauled, but until that point, the witch-hunt must be called-off.”

The deVere concludes: “Let’s tone down the rhetoric and focus on the serious issues of stamping out financial crime by implementing more robust checks and balances inside the banking system.”

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