NIGERIAN FINANCE NEWS 4/08/20
Introduction
The finance news this day will focus on the bank's implementation of the new CBN debt recovery policy starting this August, 2020 and other important economic news as compiled by Abiahu, Mary-Fidelis.
The economic news includes the following:
1. Nigeria’s oil projects threatened as IOCs suffer $27.8bn loss
2. Don’t allow FIRS kill, bury NIPOST, postal service chairman cries out
3. CBN disburses N539.8m loans to farmers in three months
4. Trade to drive growth in August – CBN survey
5. Nigerian Breweries records N152bn revenue in H1
6. SON, stakeholders move to reopen tourism industry
7. Sterling Bank reports 10% growth in interest income
8. Renewed bargain-hunting push market index by 0.29%
9. Investment One’s dollar fund offers investor comfort amid FX uncertainty
Deposit Money Banks on August 1 commenced the implementation of the Central Bank of Nigeria’s Global Standing Instruction which allows them to recover outstanding debts of debtors from other banks.
Experts who spoke to our correspondent said the implementation would help to differentiate real wealthy businessmen from debtor businessmen.
A former President, Trade Union Congress, Peter Esele, said the guideline was long overdue but added that it was better late than never.
He said, “The financial system has been abused and it is baffling that one man would be owing six banks in the same country; it can’t happen anywhere else.
“What the CBN is doing now is that it is sanitising the industry and we now actually know who are the real businessmen and the real big men. “Some men are wealthy from running banks down because a lot of the big men are running banks down.”
He said the CBN and the banks should start giving credit score. The President, United Labour Congress, Joseph Ajaero, said, “Banks that are lending money to people should make sure that they have adequate collateral.
“Ordinarily, banks cannot on their own go to another bank and take the money that was kept in another bank; they are independent and should operate independently.”
Finance and Economic News – August 4, 2020
1. Nigeria’s oil projects threatened as IOCs suffer $27.8bn loss
2. Don’t allow FIRS kill, bury NIPOST, postal service chairman cries out
3. CBN disburses N539.8m loans to farmers in three months
4. Trade to drive growth in August – CBN survey
5. Nigerian Breweries records N152bn revenue in H1
6. SON, stakeholders move to reopen tourism industry
7. Sterling Bank reports 10% growth in interest income
8. Renewed bargain-hunting push market index by 0.29%
9. Investment One’s dollar fund offers investor comfort amid FX uncertainty
Nigeria’s oil projects threatened as IOCs suffer $27.8bn loss
Several major oil and gas projects in Nigeria may suffer further delays as international oil companies operating in the country saw their financials take a dive in the second quarter of this year. The slump in oil prices caused by the coronavirus pandemic has forced many companies, including IOCs to slash their capital budgets and suspend some projects. The global oil benchmark, Brent crude, plunged to as low as $15.98 per barrel in April, its lowest since June 1999. It traded around $44 per barrel on Monday. Royal Dutch Shell said last Thursday that it posted a loss of $18.4bn in the second quarter of this year, compared to a profit of $3.5bn in the same period of 2019.
The company warned that the outlook for oil demand continued to be uncertain, saying it had cut its exploration drilling plans for this year from 77 wells to just 22. Shell cut its capital spending budget for this year in March from around $25bn to $20bn. ExxonMobil on Friday reported its biggest-ever quarterly loss of $1.1bn and confirmed plans to make deeper spending cuts. The oil giant, which suffered a loss of $610m in Q1 2020, slashed capital spending by 30 per cent this year to around $23bn.
Chevron Corporation posted its worst quarterly loss of $8.3bn in Q2 in at least three decades and warned that the pandemic wreaking havoc upon energy markets might continue to drag on earnings. “While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter of 2020,” Chevron’s Chairman and Chief Executive Officer, Michael Wirth, said..
The PUNCH had reported in December last year that a number of oil and gas projects valued at $58.4bn in Nigeria were facing an uncertain future as the IOCs failed to sanction them several years after they were announced. The recent collapse in oil prices and demand caused by the coronavirus pandemic and the price war between Saudi Arabia and Russia has compounded the challenges facing the projects. Before the pandemic, industry experts had said the regulatory and security challenges in the country had put a damper on the IOCs’ appetite to take final investment decisions on the projects.
The projects that have not reached FID include Shell’s $9.7bn Bonga South-West/Aparo, which would add 143,274 barrels per day in extra crude production capacity at its peak flow. It has the potential to boost Nigeria’s daily production by nearly 10 per cent. Other projects without FID are ExxonMobil’s $6.2bn Bosi (126,784 bpd), Chevron’s $8.2bn Nsiko (95,685 bpd), ExxonMobil’s $8.2bn Owowo West (138,301 bpd), ExxonMobil’s $6.1bn Uge-Orso (99,532bpd) and Nigerian Agip Exploration Limited’s $9.2bn Zabazaba (146,739 bpd). One of the major indigenous independent oil companies in the country, Seplat Petroleum Development Company Plc, posted a loss of $145.3m (N49.8bn) in the first half of this year, compared to a profit of $120.4m (N37bn) in the same period of 2019.
“The sharp drop in oil prices and demand may slow down the speed with which indigenous producers pursue the aspiration to ramp up production to about 50 per cent of Nigeria’s daily oil and gas production,” the Managing Director/CEO, ND Western Limited, an indigenous operator, Mr Eberechukwu Oji, told our correspondent recently.
Don’t allow FIRS kill, bury NIPOST, postal service chairman cries out
The Chairman of the Nigeria Postal Service, Maimuna Abubakar, says the Federal Inland Revenue Service has stolen the mandate of NIPOST. Abubakar said this in a series of tweets on Sunday.
The NIPOST chairman said the FIRS, which is the agency responsible for assessing, collecting and accounting for tax accruing to the Federal Government, had begun printing stamps. She subsequently called on Nigerians to ensure that NIPOST gets justice. Abubakar tweeted, “I am worried for NIPOST, having sleepless nights 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. NIPOST is the sole custodian of national stamps; another agency printing and selling stamps is against the law of the land.” The NIPOST chairman said the FIRS tactically removed her agency from the finance bill despite the contributions the postal service made to the bill. She further stated that the postal service had generated over N60bn which had been deposited in the Central Bank of Nigeria.
Abubakar stated, “FIRS did not only steal our stamps but also our ideas. What NIPOST had worked for since 2016; our documents, patent, everything sneaked into finance bill and they 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 purchase of such stamp accrues to NIPOST. There is nowhere in FIRS Act or Stamp Duty Act where it’s so stated that FIRS can produce stamp or sell stamp.
“Did you know that NIPOST had generated over N60bn in NIPOST CBN account for the Federal Government? When contacted on the telephone, the Director of Communications and Liaison Department, FIRS, Abdullahi Ismaila, said the agency would not want to comment on the matter. “We have no comment on this matter,” Ismaila said. The FIRS and NIPOST have been at loggerheads over the collection of stamp duty on behalf of the Federal Government. While the Stamp Duty Act 2004 mandated NIPOST to manage the stamp duty, the recent Finance Bill reposed the responsibility on FIRS.
CBN disburses N539.8m loans to farmers in three months
The Central Bank of Nigeria disbursed N539.8m loans to farmers between January and March 2020. It disclosed this in its third quarter economic report on titled ‘Agricultural credit guarantee scheme’, obtained on Monday. Part of the report reads, “A total of N539.8m loans was guaranteed to 3,161 farmers under the Agricultural Credit Guarantee Scheme in the first quarter of 2020..
“This represented a decrease of 53.9 per cent and 34.8 per cent below the levels in the preceding quarter and the corresponding period of 2019 respectively.” Sub-sectorial analysis showed that food crops obtained the largest share of the total, with N291.6m (54.0 per cent) guaranteed to 1,958 beneficiaries; followed by the livestock, N115.2m (21.3 per cent) guaranteed to 430 beneficiaries. Cash crops had N64.9m (12 per cent) guaranteed to 335 beneficiaries; fisheries, mixed crops and ‘others’ received N36.1m (6.7 per cent), N16.8m (3.1 per cent) and N15.3m (2.9 per cent), respectively, guaranteed to 121, 233, and 84 beneficiaries.
Analysis by state showed that 30 states and the Federal Capital Territory benefited from the scheme in the review quarter, with the highest and lowest sums of N54.8m (10.2 per cent) and N1.8m (0.3 per cent) guaranteed to Ogun and Nasarawa states respectively. The bank stated that agricultural activities in the first quarter of 2020 were predominantly preparation of land for early wet season planting, harvesting of tree crops and irrigation-fed vegetables. In the livestock sub-sector, it stated, farmers continued to intensify efforts towards raising of poultry birds and cattle in preparation for the 2020 Easter festivity.
The CBN said during the quarter, the African Development Bank, in collaboration with the Federal Government, signed a $500m memorandum initiative to develop four special agro-industrial processing zones in the country. The special agro-industrial processing zones were designed to concentrate agro-processing activities within areas of high agricultural potential to boost productivity, integrate production, processing and marketing of selected commodities, it stated.
It said the initiative was capable of boosting the structural transformation of the economy by providing opportunities for public and private sector investments. The report said, “Following the outbreak of COVID-19, which led to lockdown in major cities around the globe, the Nigerian agricultural sector in Q1 2020, witnessed a huge demand uptick arising from panic buying, mostly for essential commodities. “The panic buying was fueled by the speculations of economic slow-down.” It stated that the development also led to increase in commodity prices in the market.
Trade to drive growth in August – CBN survey
The retail and wholesale trade sector will drive business expansion in August, according to expectations from firms. The statistics department of the Central Bank of Nigeria disclosed this in its business expectation survey report. The survey was conducted in July. Part of the report read, “The analysis of businesses with expansion plans in August showed that the wholesale/retail trade sector indicates the highest disposition to expand with an index 46.3 points;
“Construction sector had an index of 45.0 points; agric/services sector had an index of 43.4 and manufacturing sector had 39.7 points.” At -7.9 index points, it stated that the overall confidence index indicated respondents’ pessimism on the overall macro economy in the month of July. However, it added, respondents were optimistic in their outlook for August with a confidence index of 33.7. Furthermore, they expressed optimism in the overall business outlook in September 2020 and January 2021 as shown in a greater confidence of the economy, at 45.5 and 62.4 index points respectively.
Respondent firms’ opinions on the volume of business activities (47 points) indicated a favourable business outlook for August 2020. They also hoped to employ in the next month as the outlook was positive at 12.3 points. Respondents were also optimistic about the volume of business activity and employment outlook index in the next two and six months as all indexes were positive. The break down by sector showed that wholesale/retail trade had the highest prospect for employment in the next month, with an index of 16.4 points followed by manufacturing sector (14.6 points) and agric/services sector (3..1 points).
Respondent firms expected the naira to depreciate in July but to appreciate in August, next two months and next six months, as their confidence indices stood at -14.6, 3.0, 16.5 and 49.4 index points respectively.
Nigerian Breweries records N152bn revenue in H1
Nigerian Breweries Plc has said it recorded N152bn in revenue and N5.7bn profit after tax in its half-year period ended June 30, 2020.
The company said this in a statement on Monday, with the title ‘Nigerian Breweries Plc earns N151bn revenue, N5.7bn profit for the first half of 2020.’ It said a breakdown of its unaudited results showed a decline in revenue, compared to the N170bn recorded in the corresponding period of 2019. The company said the results showed a strong balance sheet despite several factors that negatively impacted on the company’s operations. It said the factors included an increase in excise duty, a rise in inflation, an increase in Value Added Tax from five per cent to 7.5 per cent, as well as the impact of the coronavirus pandemic on businesses worldwide.
The company said despite the challenges, its financial position showed stability and sustained profitability. To support the fight against the COVID-19 pandemic, the company said during the period under review, it made various donations in cash and kind valued at about N531m, out of a phased commitment of N600m to the federal and state governments’ COVID-19 relief funds.
Nigerian Breweries said, “The board of directors commended the company’s management for its efforts to mitigate the impact of the pandemic on the business, as well as the prudent management of its resources as reflected in a seven per cent reduction in expenses incurred on marketing, distribution, and administration. “The board expressed confidence that the company is well-positioned to continue to deliver return on investment to shareholders..” According to the statement, the company’s priority during the period remained ensuring the health, safety and welfare of employees, customers and partners.
SON, stakeholders move to reopen tourism industry
The Standards Organisation of Nigeria is collaborating with stakeholders in the tourism sector to produce a draft safety guideline that will assist in the reopening of the country’s hospitality business. SON’s Director-General, Anthony Aboloma, said this during an online meeting of the Working Group of the Mirror Committee on Tourism and Related Services.
The agency said in a statement that the guidelines would help to mitigate the devastating effect of the COVID-19 pandemic on the tourism sector.
The chairperson of the committee and Director-General, National Institute for Hotels and Tourism, Chika Balogun, said stakeholders needed to do everything possible to see that they pull out of the challenges put posed by the pandemic.
Sterling Bank reports 10% growth in interest income
Sterling Bank Plc has reported a net interest income of N33.5bn in the half-year ended June 30, 2020, as against N30.4bn during the corresponding period of 2019. This represents a growth of 10.1 per cent. The bank’s total assets also rose by 9.4 per cent to N1.29tn during the review period from N1.18tn in 2019 while customer deposits inched up by 2.5 per cent to N915.2bn in 2020 from N892.7bn in 2019. The lender closed the half-year with a trading income of N3.9bn as against N1.2bn for the corresponding period of 2019, representing an increase of 242.8 per cent.
The Chief Executive Officer of Sterling Bank Plc, Mr Abubakar Suleiman, said, “Our impressive half-year performance in the face of the COVID-19 pandemic and the ensuing economic disruption belies the rough seas ahead. “In the second quarter of the reporting period, we focused on empowering our stakeholders to respond to the unprecedented disruption occasioned by prolonged restriction to movement while supporting them to adapt to new ways of banking. “Our commitment to digitisation was validated as we continued to serve existing and new customers through our mobile and digital platforms.”
He added, “In the second half of the year, our focus remains the same; retooling our employees to function optimally while observing social distancing, enhancing our execution capacity and enabling our customers to thrive in the middle of a pandemic. “We will continue to focus on the sectors that are critical to the wellbeing of the economy, or as we call it, the HEART sectors namely: Health, Education, Agriculture, Renewable Energy and Transportation..” He observed that the contracted gross earning was primarily due to a dip in fees and commission as a result of a downward review of electronic banking fees.
Suleiman noted that although interest income declined by 4.3 per cent, this was offset by an 18.1 decline in interest expense, thereby delivering a 130 bps drop in cost of funds and consequently, a 60-bps reduction in net interest margin. The CEO noted that overall, the bank delivered a profit after tax of N5.4bn on gross earnings of N70.2bn in the first half of 2020 compared with a PAT of N5.7bn on gross earnings of N72.3bn during the corresponding period of 2019.
Renewed bargain-hunting push market index by 0.29%
Following renewed bargain-hunting in most blue-chip stocks, especially Flour Mills and GlaxoSmithkline (GSK ) Consumer Nigeria, the Nigerian equity market commenced trading for the week on the positive note yesterday, causing the All Share Index (ASI) to appreciate by 0.29 per cent. Specifically, at the close of trading Monday, the ASI increased by 72.39 absolute points or 0.29 per cent to close at 24,766.12 points. Similarly, the market capitalisation rose by N37 billion to close at N12.919 trillion.
The uptrend was impacted by gains recorded in large and medium capital stocks, including Flour Mills of Nigeria, BUA Cement, GSK Consumer Nigeria, Guaranty Trust Bank, and Neimeth International Pharmaceuticals.
Analysts at United Capital Plc said the outcome of more first half (H1) 2020 earnings results would continue to spur market reactions. Also, Afrinvest Limited said the performance of the market this week would be majorly dictated by the trend in earnings releases. Vetiva Dealings and Brokerage firm said: “Bullish sentiment was seen at the domestic market today, as all sectors closed in the green except the Insurance sector, which declined 2.35% d/d. We expect a mixed trading session tomorrow, with bargain hunting in some counters and profit-taking in others.”
Market breadth closed positive, with 19 gainers versus 16 losers. Neimeth International Pharmaceuticals recorded the highest price gain of 10 per cent to close at N1.65 per share. Flour Mills of Nigeria followed with 9.97 per cent to close at N18.75, and University Press rose 9.90 per cent to close at N1.11, per share. GlaxoSmithkline Consumer Nigeria advanced 8.16 per cent to close at N5.30, while Honeywell Flour Mill edged up five per cent to close at N1.05, per share. On the other hand, UAC of Nigeria (UACN) led the losers’ chart by 10 per cent to close at N6.30 per share. Aiico Insurance followed with 9..57 per cent to close at 85 kobo, and Sunu Assurances Nigeria lost 9.09 per cent to close at 20 kobo, per share.
Mutual Benefits Assurance slipped 8.70 per cent to close at 21 kobo, and Custodian Investment shed 7.27 per cent to close at N5.10, per share. The total volume traded rose by 83.6 per cent to 186.482 million shares worth N1.31 billion, traded in 4,718 deals. Transactions in the shares of Transnational Corporation of Nigeria (Transcorp) topped the activity chart with 23.385 million shares valued at N14.348 million. Custodian Investment followed with 19.138 million shares worth N97.724 million, while Guaranty Trust Bank traded 18.173 million shares valued at N411.609 million. FBN Holdings traded 13.535 million shares at N69.701 million, while United Bank for Africa (UBA) transacted 9.715 million shares worth N60.52 million.
Investment One’s dollar fund offers investor comfort amid FX uncertainty
As a petrodollar economy, Nigeria is susceptible to weakness in global oil prices which has continually impacted the country’s exchange rate and brings to the table conversations around devaluation of the local currency as was the case in 2016 when the local currency devaluation led to a more than 50 percent decline in the dollar value of investors’ naira assets. Diversification of investment portfolio between naira and dollar assets has proven to be a superior investment strategy as it helps in saving to further dollar obligations such as vacation, schooling amongst others.
With a minimum of $500, investors seeking to hedge their savings against currency risk can invest in Vantage Dollar Fund (VDF) managed by Investment One Funds Management Ltd and would earn a steady return on their investment. The pool of funds will be invested in Nigerian originated dollar-denominated assets including sovereign and corporates, the firm said.
Launched in 2018, the Vantage Dollar, Fund has awarded investors good value for their money both in terms of interest income and capital appreciation. It is an open-ended fund, meaning investors can continuously make additional investment in multiples of $1.00 to their already subscribed units with a minimum holding period of 180 days and a redemption cycle of T+5 (payment is made not later than five business days after an investor submits a redemption form).
The fund is regulated by the Securities and Exchange Commission (SEC) and in accordance with regulation; it has an independent trustee and custodian. The Vantage Dollar Fund by the financial services firm is one of such funds that seek to protect investors’ assets against currency risk, as the investment is dollar-denominated. For flexibility, the firm noted that investors who might have a need for their monies within the minimum holding period, to be allowed redemption during the minimum holding period subject to a 15 percent charge on the positive total return on the units being redeemed on the day of redemption.
According to Investment One, the fund manager, every unit holder shall be entitled to receive an electronic certificate for the number of units purchased by such unitholder, and this electronic certificate shall be conclusive evidence of the number of units held. These investors are sure of enjoying numerous benefits including capital appreciation, competitive returns diversified portfolio; and regular and steady income stream, that is independent of policy changes in the economy.
CONCLUSION
Friends, Jesus is coming soon. If you are still living in sin, its time to repent, don't hide them. If you are ready to do so now, say this simple prayer:
Heavenly Father, I come to You in the name of Jesus Christ.
I believe that Jesus died for my sins and rose again for my justification. I repent of my sins and ask for forgiveness. I ask Jesus to come into my heart and reign as my Lord and Saviour. I receive Him by faith, I am born again!
FIRE...
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