Investors Gain N23.43bn as NSEASI Inches Up by 0.11%, Erases Previous Day Loss
Equities market closed today on a positive note, as NSEASI appreciated by +0.11% to close at 39,550.36 basis points as against -0.04% depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at -1.79%.
Market breadth closed flat as HONYFLOUR led 16 Gainers as against 16 Losers topped by SCOA at the end of today’s session – an unimproved performance when compared with previous outlook.
Market turnover closes negative as volume moved down by -21.60% as against -25.18% downtick recorded in the previous session. TRANSCORP, FBNH and OANDO were the most active to boost market turnover. NESTLE and DANGCEM topped market value list.
PHARMDEKO leads the list of active stocks that recorded impressive volume spike at the end of today’s session.
Facebook-backed cable to land in Nigeria, 3 others
2Africa, a Facebook-backed subsea cable project, is finalising plans to become the largest internet service provider in Nigeria and the rest of Africa, with the announcement on Monday that Southeast Nigeria is now a new landing for the cable
Nigerians hurting as food inflation exceeds global record
A United Nations (UN) report reveals that global food prices have declined a second consecutive time in July 2021. In the report, the Food and Agricultural Organisation (FAO) price index, which tracks changes in international prices of the most globally traded food…?
CBN and the burden of forex on manufacturers
There is a peculiar challenge facing Nigeria’s economy. It is crystal clear. The cause for this is no one’s fault to be honest as it was driven by the economic fallout of the COVID-19 global pandemic. Almost every country in the world had their share of the economic downturn.
Nigeria’s Inflation rate falls further to 17.38% in July
Nigeria’s inflation rate for July 2021 dropped to 17.38percent compared to 17.75percent recorded in June 2021, according to the latest consumer price report released by the National Bureau of Statistics (NBS)
Nigeria’s low science research investment yields vaccine deal to SA
On a local radio program on Friday, 13 August 2021 the on-air personality hosting the show wanted to know why Nigeria with all her about 200 million people was not considered by Johnson & Johnson for a vaccine production deal it signed with South Africa recently.
Nigeria’s BOI plans N362bn Eurobond to support COVID-hit businesses
Nigeria’s state-owned Bank of Industry plans to raise as much as N362 billion ($883 million) from international debt markets this year for lending to companies hampered by the Covid-19 pandemic in Africa’s largest economy, according to a Bloomberg report
Naira weakens at official market on increased demand
Nigeria’s currency on Monday weakened against the dollar by 0.21 percent to close at N411.67k/$ compared to N410.80k/$ closed on Friday, at the Investor and Exporters (I&E) forex window.
Nigeria Needs Solutions to Address Low Revenue and High Borrowings – Patience Oniha, DG DMO
The Director-General, Debt Management Office (DMO), Patience Oniha, has expressed the need for solutions to address low revenues and curb the rising level of new borrowings in the country.
The DMO boss observed the need for action at an interactive session on the 2022-2024 Medium Term Expenditure/Fiscal Strategy Paper (MTEF/FSP) held by the National Assembly’s House Committee on Finance yesterday in Abuja.
In her contribution to discussions, Nigeria debt Czar noted that successive low revenues in the Budget resulted in fiscal imbalance with less than 100% revenue achievements, resulting in high borrowing levels in recent years. Expectedly, these borrowings have led to a high growth rate of the country’s debt stock and a significant debt service burden. She added that the trend is the same in the draft 2022-2024 MTEF.
Present at the session were the Honorable Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed; Director-General, Budget Office of the Federation, Ben Akabueze; Director-General, Debt Management Office, DMO, Patience Oniha; Comptroller-General, Customs, Col. Hameed Ibrahim Ali, Rtd and other top officials of the Central Bank of Nigeria, CBN.
Ahead of Next FGN Bond Auction Scheduled for August 18th, 2021
Issue on Offer/Summary
The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), will be conducting a bond auction on Wednesday 18 th of August 2021. The indicated total amount to be on offer is NGN150bn. All instruments on offer are re-opening issues.
13.98% FGN FEB 2028 NGN50bn
12.40% FGN MAR 2036 NGN50bn
12.98% FGN MAR 2050 NGN50bn
Current Yield Analysis
The Debt Management Office (DMO) held its monthly auction in July 2021 where it offered NGN150bn on the 2028, 2035 and 2050 instruments collectively. The instruments on offer were oversubscribed with bid to cover ratios of 1.13x, 1.47x, and 3.13x across the 13.98% FEB 2028, 12.40% MAR 2036 and 12.98% MAR 2050 instruments respectively. This is reflective of robust investors’ appetite despite persistent high inflation and the consequent negative real returns.
At the coming auction, we do not expect stop rates to trend higher as we think that the federal government is less inclined (relative to much earlier in the year) to borrow domestically. Our thoughts are based on two main factors. Firstly, the government’s plan to raise USD6.20bn in Eurobonds implies that c.87% of outstanding deficits (including deficit from the supplementary budget) can be financed with proceeds of the issuance, leaving c.13% to be financed via local borrowing. Furthermore, the ease in production cuts which took effect in August 2021, should translate to higher oil receipts and a generally better revenue outlook over the near to medium term.
Meanwhile, in the secondary market for FGN bonds, average yield moderated to 10.93% on 16 th August 2021 from 11.45% (recorded on the date of the last auction). In our opinion, the bullish streak reflects strong investor demand and liquidity, in addition to a general expectation of sustained decline in interest rates over the near term.
Bond Absolute and Relative Valuation
In valuing the 13.98% FGN FEB 2028, 12.40% FGN MAR 2036 and 12.98% FGN MAR 2050 re-opening offers with the current yield curve as the basis for discounting, we arrived at the following fair value, implied yield and an IRR for the instrument
Our valuation gives a fair-trading price ex coupon payment, the expected return on the bond considering its periodic interest payments and the expected return on the bond’s periodic payments.
We analysed the issues on offer given the current yield environment, market liquidity, as well as a review of the recent past auctions, whilst also introducing market sentiment factor into our valuation, on which we advise bid yield ranges for the issues on offer.
A Widening of the Fiscal Deficit in Q1 2021
We see from the CBN’s Quarterly Statistical Bulletin (QSP) for Q1 ’21 that the fiscal operations of the Federal Government of Nigeria (FGN) resulted in a deficit of NGN2.4trn, up from c.NGN1.6trn in Q4 ’20 (NGN1.4trn Q1 ’20).
Nigeria Recorded $85.21bn Net Foreign Liabilities – IMF
Nigeria’s foreign liabilities stood at $187.36bn while the country’s foreign assets amounted to $102.15bn as of December 2020, the International Monetary Fund has said.
Reps Begin 2022-2024 MTEF Hearing, List 83 MDAs
The House of Representatives’ Committee on Finance will on Monday (today) begin an eight-day public hearing on the 2022-2024 Medium Time Expenditure Framework and Fiscal Strategy Paper
FG Earmarks N59b for Rural Roads Development, Says Budget Minister
The Minister of State for Budget and National Planning, Clem Agba, has disclosed that a total of N34 billion has been set aside by the federal government for the development of rural roads, with additional N17 billion added to it, under the sustainability planning.