NIGERIAN FINANCIAL NEWS REPORT - 29/07/20
Introduction
The opening up of the economy after the Corona lockdown is coming slowly and steady, especially with investor's oversubscribing the NOVA Merchant Bank bond by 300%.
The Nigerian Financial Report for this morning is focusing on the alarm raised by the Lawmakers over the terms of the Chinese Loans signed by the government, as well as other important economic data and summaries compiled by Abiahu, Mary-Fidelis Chidoziem
Enjoy your reading
CONTENT
1. Lawmakers raise Alarm over Chinese Loans
2. NOVA Merchant Bank’s debut N10bn bond oversubscribed by 300%
3. Banks’ non-performing loans now N1.2tn – CBN
4. E-bills payment rises by 86%, reaches N444.16bn
5. N651.77bn generated from VAT in six months – NBS
6. Banks’ foreign assets rise 10.2% on naira adjustment
7. Equity market gains N186bn on blue-chip firms
8. 23% of bank loans threatens industry’s profitability – Agusto & Co
9. The government may have realised N4.4bn from oil bid round processing so far
LAWMAKERS RAISE ALARM OVER CHINESE LOANS
The House of Representatives has raised the alarm over loan agreements being entered into by the Federal Government with China.
According to the lawmakers, Nigeria will concede some of its sovereignty if the country defaults in the repayment plan. The House Committee on Treaties, Protocols and Agreements, which raised the alarm in Abuja on Tuesday, expressed its resolve to review loan facilities already taken by the country from China and other countries.
The Minister of Transport, Rotimi Amaechi, who appeared before the committee on the $500m loan taken on the Abuja-Kaduna and other rail line projects, however, warned the lawmakers against sending a wrong signal to China.
He said this might lead to the abandonment of ongoing projects if the Asian country calls off the agreement. Chairman of the committee, Nicholas Ossai, faulted non-involvement of the National Assembly in loan negotiations by the Federal Government and its officials.
He cited the loan obtained for the Galaxy Backbone to build and operate the National Information and Communication Technology Infrastructure Backbone, a cross-country optical fibre backbone, from the China-Exim Bank in September 2018 as an example of such loans.
The committee specifically cited Article 8(1) of the agreement, which states that, ‘the borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.’
Ossai said, “I have also seen from the Ministry of Communications where Nigeria signed off some certain level of its sovereignty if part of the clauses is breached.
“So, when the National Assembly reacts in this manner, to question some level of agreements being entered into by any ministry of this country with any other nation, we have every right to question that; because anything that is going to happen will happen to our generations unborn.”
Responding, Amaechi, disagreed with Ossai, saying the Federal Government could not be sending all its international deals to the lawmakers for scrutiny before they are signed.
Meanwhile, the committee asked Ameachi to reappear on August 17 along with more details on the loans and projects.
It also summoned the Minister of Communications, Dr Ali Isa Pantani; the Director-General of the Debt Management Office, Ms. Patience Oniha, and the Minister of Finance, Mrs Zainab Ahmed, to explain the $500m loan and provide details on the agreement signed between the Federal Ministry of Transport and the CCECC.
ECONOMIC SUMMARIES
1. NOVA Merchant Bank, a leading merchant bank in Nigeria, has announced the successful issuance of its N10 billion 7-Year Subordinated Unsecured Bond under its N50 billion debt issuance programme. The transaction represents NOVA’s first bond issuance in the debt market and was oversubscribed by 300 percent.
2. Banks’ non-performing loans now N1.2tn – CBN
Banks’ non-performing loans stood at N1.2tn as of the end of June according to figures obtained from the Central Bank of Nigeria on Monday. This amounted to about 6.4 per cent of the gross credit of the banks to the economy which stood at N18.9tn as of the period under review.
The latest statistics show that the banks have gradually reduced the bad debts in their books in recent years. This was linked to increased recoveries, write-offs and disposals by the lending institutions. According to figures from the National Bureau of Statistics on selected banking data, the lending institutions’ non-performing loans stood at N1.67tn as of the end of March 2019, from a figure of N1.79tn as of the end of 2018.
At the end of the Monetary Policy Committee Meeting last week, the Central Bank Governor, Godwin Emefiele, affirmed that the non-performing loans had decreased in the sector. He said, “The committee noted the decrease in NPLs ratio to 6.4 per cent at End-June 2020 from 9.4 per cent in the corresponding period of 2019, on account of increased recoveries, write-offs and disposals. “The committee expressed confidence in the stability of the banking system and urged the bank to monitor the compliance of Deposit Money Banks to its prudential and regulatory measures to sustain the soundness and safety of the banking industry.”
Emefiele disclosed that the aggregate domestic credit (net) grew by 5.16 per cent in June 2020 compared with 7.47 per cent in May 2020. He said the committee commended the CBN Loan-to-Deposit Ratio initiative to address the credit conundrum as the total gross credit increased by N3.33tn from N15.56tn at End-May 2019 to N18.90tn at End-June 2020.
“These credits were largely recorded in manufacturing, consumer credit, general commerce, and information and communication and agriculture, which are productive sectors of the economy,” he said. Also, the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria, Mr Ahmed Kuru, said the corporation had developed a new receiver framework for its recovery agents. As part of the corporation’s efforts to recover the outstanding N5tn debt, he said the corporation had disengaged some of its receivers for non-performance.
3. E-bills payment rises by 86%, reaches N444.16bn
The payment of bills electronically almost doubled from January to May this year, compared with the same period in 2019. Analyses of the latest data from the Nigerian Interbank Settlement Scheme indicated that the use of digital financial transaction platforms for the payment of utility bills and other subscriptions in the first five months of the year hit N444.16bn. This is 86 per cent increase from N238.81bn recorded from January to May 2019.
However, further analyses of the data indicated that the volume of electronic payment of bills such as electricity bills, tax payments, toll payments, cable TV subscriptions, hotel bookings, school fees and airtime top-up, among others, declined by 30 per cent. The volume of e-bills payments from January to May this year was 373,652 compared to 530,941 in the corresponding period in 2019. The payment of bills are usually fulfilled via different digital platforms such as mobile apps, Point of Sale terminals, USSD channels and NIBSS Instant Payment platform.
In January this year, bills valued at N92.75bn were paid online, representing 86 per cent increase from N49.76bn paid in January 2019. In February 2020, e-bills valued at N78.38bn were recorded, indicating 74 per cent growth from N44.95bn e-bills paid in February 2019. In the following month, the value of e-bills carried out via digital payment platforms reached a peak of N107.06bn, showing a 128 per cent growth from N46.93bn in March 2019.
During the lockdown in some states, payment of bills online hit N85.67bn in April, representing 79 per cent rise in the value of e-bill transactions compared with N47.86bn recorded in April 2019. In May 2020, bills worth N80.29bn were paid digitally, showing a 65 per cent increase from N49.31bn recorded in the corresponding month in 2019. As the drive to reach 80 per cent financial inclusion target by 2020 given by the Central Bank of Nigeria intensifies, more PoS terminals are being issued for super agents to extend the reach of financial services to remote areas where banking services are not available.
Speaking at a virtual event recently, the Head, Digital Financial Services, CBN, Stephen Ambore, stated that recent figures showed that 36.6 million Nigerians were excluded from access to financial services, including pension and insurance. According to him, the industry started from 58 per cent financial inclusion in 2012 and is targeting 80 per cent inclusion by the end of 2020.
He said, “What that means is that we want to improve the penetration of payments by 70 per cent this year. Improve credits to 60 per cent, improve insurance by 40 per cent this year.” According to Ambore, the CBN revised the national financial inclusion strategy and provided a level playing field for the provision of financial services in order to attain 80 per cent financial inclusion by the end of the year. He said through the Shared Agent Network Expansion Facilities initiative, the apex bank was looking to expanding the digital payments access points from zero to 500,000 by the end of this year.
4. N651.77bn generated from VAT in six months – NBS
A total of N651.77bn was generated from Value Added Tax in the first half of 2020, according to latest figures from the National Bureau of Statistics. The NBS disclosed this on Monday in its report on, “Sectoral distribution on Value Added Tax,” for the half year period of 2020.
Part of the report reads, “Sectoral distribution of Value Added Tax data for H1 2020 reflected that the sum of N651.77bn was generated as VAT in H1 2020 as against N600.98bn generated in H1 2019. “This represents 8.45 per cent growth year-on-year.”
Professional services generated the highest amount of VAT with N95.92bn generated and closely followed by other manufacturing generating N67.63bn, commercial and trading generating N31.10bn, it added. The report said mining generated the least, closely followed by textile and garment industry and pharmaceutical, soaps and toiletries with N127.58m, N499.19m and N648.78m generated respectively.
Out of the first half total, N335.82bn was classified as local non-import VAT while N161.74bn was classified as foreign non-import VAT. The balance of N154.21bn was classified as NCS-import VAT.
5. Banks’ foreign assets rise 10.2% on naira adjustment
The net foreign assets of banks rose by 10.2 per cent in the first quarter of 2020, according to the Central Bank of Nigeria. The CBN, which disclosed this in its monthly economic report for the first quarter of 2020, said the increase was due to the exchange rate adjustment during the period.. It said, “Foreign assets (net) of the banking system, on a quarter-on-quarter basis, rose by 10.2 per cent to N6.39tn at End-March 2020, compared with the growth of 7.5 per cent in the fourth quarter of 2019, but was in contrast to the growth of 15.3 per cent at the end of the first quarter of 2019.
“The increase in net foreign assets was due largely to the exchange rate adjustment during the review period.”
The apex bank stated that claims on the domestic economy (net), on a quarter-on-quarter basis, grew by 5.0 per cent to N37.97tn at the end of March 2020. It said, “This reflected wholly the 2.6 and 5.8 per cent increase in net claims on government and claims on other sectors, compared with the growth of 1.4 per cent and 15.9 per cent at the end of the fourth quarter of 2019 and the first quarter of 2019, respectively.
“Net banking system claims on government, on quarter-on-quarter basis, grew by 2.6 per cent at end-March 2020, compared with a growth of 48.0 per cent in the first quarter of 2019, but was in contrast to the 4.4 per cent decline recorded at the end of the fourth quarter of 2019.” The CBN said the development reflected the increase in holdings of government securities by the monetary authority.
6. Equity market gains N186bn on blue-chip firms
Equity trading on the floor of the Nigerian Stock Exchange on Monday closed on the positive note with a gain of N186bn, following gains recorded by some blue-chip firms. The market performance indices, NSE ASI, appreciated by 1.46 per cent with market breathe closing negative with 15 gainers as against 19 losers.
Consequently, the All-Share Index grew by 355.88 basis points or 1.46 per cent from 24,427.73 index points last Friday to 24,783.61 while the market capitalisation of equities appreciated by N186bn to close at N12.93tn from N12.74tn. On the activity chart, the premium sub-sector dominated in volume terms with 62.34 million shares exchanged in 1,673 deals. The sub-sector was enhanced by the activities in the shares of FBNH Plc and Lafarge Cement Plc..
Banking sub-sector boosted by the activities in the shares of GTBank Plc and Unity Bank Plc followed with 26.32 million units traded in 850 deals. In all, investors exchanged a total of 169.99million shares exchanged in 4,336 deals.
Further analysis of the day’s trading showed that Unity Bank Plc led the gainers with 9.62 per cent to close at 57 kobo per share while Wapco Plc followed with 9.59 per cent to close at N12.00 per share and GTBank Plc with a gain of 7.62 per cent to close at N2.30 per share. On the flip side, AXA-Mansard Insurance Plc and UAC-Property Plc led the losers’ chart with a drop of 10 per cent each to close at N1.44 and 81 kobo per share, respectively. Seplat Petroleum Plc followed with a loss of 9.99 per cent to close at N312..70 per share while Berger Paints Plc dropped by 9.84 per cent to close at N5.50 per share.
7. 23% of bank loans threatens industry’s profitability – Agusto & Co
Agusto & Co. Limited has said 23 per cent of banking sector loans poses threat to the industry’s asset quality and future profitability. It said this in its 2020 banking industry report, which was released on Monday.
The report said, “Approximately 23 per cent of the industry’s gross loans and advances was classified in the stage two category as at 31 December 2019, according to the International Financial Reporting Standard 9. “As at the same date, four out of the twenty-four banks covered in the report had stage two loans to gross loans ratios above the 23 per cent industry’s average.
“Agusto & Co. believes that the volume of stage-two loans is a threat to the industry’s asset quality and future profitability. “Stage-two loans primarily comprise exposures with an increase in the associated credit risk compared to when the loan was disbursed.” The report said COVID-19 pandemic with its impact on businesses had elicited an increase in the volume of stage-two loans.
According to Agusto & Co, stage-two loans were susceptible to adverse migrations in the face of a prolonged macroeconomic downturn. Following the forbearance granted by the Central Bank of Nigeria in March 2020 permitting banks to restructure loans to businesses that had been adversely impacted by the COVID-19 pandemic, it stated that the banking industry had restructured over N7.8tn (almost half) of the loan portfolio as at June 2020, according to the CBN. The firm said the forbearance was expected to keep the industry’s impaired loan ratio, which stood at 7.6 per cent as at 31 December 2019, at bay in the short term.
Agusto & Co, however, expressed concern over the performance of the affected loans, given that the coronavirus pandemic was yet to be curtailed and a second wave may be looming. It said a further slowdown in economic activities and a total lockdown might worsen an already bad situation.
8. The government may have realised N4.4bn from oil bid round processing so far
The Federal Government of Nigeria may have so far raked in an estimated N4.4 billion already from the marginal oil field processing bid round. Total revenue from processing alone will be more than N5 billion by the end of the process. This amount to be realised from the processing does not include the signature bonuS
CONCLUSION
Friends, the King (JESUS CHRIST) is coming. The question is "Where will you spent eternity - in heaven or hell". This is the time to work out your salvation...Now is the acceptable time.
If you have not yet received Jesus as Lord and Saviour of your life, say this short prayer:
Raise your right hand up unto the Lord and say: “Father, in the name of Jesus, I come before you now. I confess that I am a sinner. Lord, forgive me and cleanse me with your blood. Lord Jesus, come into my life, take control of my life, in Jesus name.”
FIRE...
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