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The world taking note as tech cleanses Nigeria’s image

In the same week Nigerians woke up to news of the arrest of Abba Kyari, a deputy commissioner of police, over his involvement in drug trafficking, Flutterwave, a Nigerian-founded fintech company, announced it had raised $250 million Series D fund from investors.

As foreign investors pour in, Nigerian startups hunt for scale overseas

While tech startups in Africa had a record funding year in 2021, a majority of the cheques were written by foreign investors, either investing for the first time or those who have already been on the continent working with startups.

New law shifts pressure on INEC

Almost seven years after assuming office, President Muhammadu Buhari on Friday, February 25, 2022, signed the amended 2010 Electoral Act into law. The first time he would do so. The Bill was forwarded for assent by the Clerk of the National Assembly via a letter dated January 31, 2022.

Crude shortfall rids Nigeria of price gains

Nigeria has remained far from reaping the benefits of the high oil prices in the international market, as its production falls below the quota set by the Organization of Petroleum Exporting Countries (OPEC). Oil prices had reached above $105 a barrel as at last Thursday, being the first time since 2014.

Oil rally swings Seplat back to profit in 2021

Seplat Energy, the largest indigenous energy company by market value, has bounced back from the pandemic-induced loss of 2020, as the oil rally helped push the company back to profitability in 2021.

 

 

Phillip Aivoji, ex- commissioner emerges Lagos PDP Chairman

Philip Aivoji, a former Commissioner for Commerce, Industry and Tourism in Lagos State, has been elected the new chairman of the People’s Democratic Party (PDP) in the state. Aivoji was elected at a state congress held on Sunday in Lagos.

Investors Gain N35.63bn as NGXASI Inches Up by 0.14% to Open the Week Positive

Equities market closed on a positive note, as NGXASI appreciated by +0.14% to close at 47,394.53 basis points as against +0.12% appreciation recorded previously. Its Year-to-Date (YTD) return currently stands at +10.95%.   

Market breadth closed positive as LINKASSURE led 19 Gainers as against 15 Losers topped by ACADEMY at the end of today’s session an unimproved performance when compared with previous outlook.         

Market turnover closed positive as volume moved up by +18.73% as against -25.64% downtick recorded in the previous session. FCMB, TRANSCORP and ZENITHBANK were the most active to boost market turnover.  ZENITHBANK and FCMB topped market value list.

TRANSCOHOT leads the list of active stocks that recorded impressive volume spike at the end of today’s session.

Zenith Bank Declares N244.56bn PAT in 2021 Audited Results

Zenith Bank Plc released its 2021 Audited results for the period ended December 31st, 2021.

Key Highlights

  • Net Interest Income grew by 7% to N320.80bn from N299.68bn
  • Profit before tax stood at N280.37bn
  • Profit after tax stood at N244.56bn
  • Share Price Currently Stands at N26.95k

    FY AUDITED REPORT FOR PERIOD ENDED 31 DEC

 2021 N’m2020 N’m% Change
 DECDEC 
Gross Revenue765,558696,4509.9%
Interest Income427,597420,8131.6%
P(L)BT280,374255,8619.6%
Taxation(35,818)(25,296)41.6%
P(L)AT244,558230,5656.1%
Basic EPS(K)7.787.346.0%

                        BALANCE SHEET INFORMATION

Net Asset1,279,6621,117,47314.5%

CORPORATE  DECLARATION

Proposed Dividend                         N2.80k

Qualification Date                           25-Mar-22

Payment Date                                   06-Apr- 22

Closure Date                                      28-Mar-22          

AGM Date                                           06-Apr-22

US Crypto Lending Crackdown May Accelerate Regulation, Conformance

The recent SEC settlement against cryptocurrency firm BlockFi may set precedent for broader regulatory crackdown against the undisclosed risks of crypto lending, which should result in increased conformance to regulation by centralised digital asset firms. This, along with other regulatory developments and more clearly defined restrictions for centralised and decentralised finance (DeFi) firms, would be credit positive for the sector, Fitch Ratings says.


Under the settlement with the SEC and state regulators, BlockFi will pay $100 million in penalties for offering unregistered BlockFi interest accounts (BIAs) that offer high annual percentage rate (APRs) to customers to lend out digital tokens. BIAs must now be classified and registered as securities under applicable security laws, as BlockFi does not qualify for an exemption from SEC registration. BlockFi agreed to cease offering or selling BIAs in the U.S. until it registers its crypto lending products.


The crypto ecosystem offers income and yield products, not unlike savings accounts at commercial banks that pay APRs on customer deposits but at much higher rates, some nearing 20%. However, the liquidity lock-up and the risks faced are significantly different. Crypto interest accounts are not FDIC-insured and have increased risk of loss from cybercrime or crypto lenders being hacked. BlockFi’s crypto deposits, which are around $10 billion, were lent out to institutional counterparties, with only 17% of loans being over-collateralised despite representations that such loans were “typically” over-collateralised.

Increased disclosure and regulatory requirements and the classification of digital assets as securities could accelerate the growth of crypto by attracting more investors. However, this will also translate into higher costs and compliance hurdles for crypto firms and lower yields, which could make it less attractive to retail investors seeking higher APRs.


The settlement could also accelerate fintech compliance with securities legislation. Crypto lending firms have criticised lack of clear regulatory guidelines and have disputed the securities classification of depository offerings. Firms lend out deposits to institutional investors at higher rates or borrow against crypto to execute their trades or to take advantage of price discrepancies in other financial instruments. Regulators have scrutinized crypto lending firms’ use of deposits to fund other business activities, however no uniform rules currently exist that indicate how the deposits can be used. 


Yield farming through DeFi involves liquidity providers encumbering tokens into a smart contract-based liquidity pools, with assets lend to institutional borrowers, earning a fee for the crypto asset provider. This can expose liquidity providers to “impermanent losses” arising from the price of tokens changing when they withdraw from the liquidity pool compared to when the tokens were first deposited in the pool. In addition, there are software risks, and ultimately, no public backstop such as FDIC insurance.


Following the BlockFI settlement, crypto platform Nexo indicated that it will also register its depository offerings and has amended the terms for U.S. customers who had received high APRs on crypto deposits. Nexo’s current U.S. customers will be able to continue earning high rates on existing digital-asset balances but not on new deposits. New U.S. clients will not be offered the product; however, non-U.S. customers will remain unaffected.


Coinbase Global had planned to offer similar accounts but dropped that proposal after increased scrutiny by the SEC, which had also been reviewing product offerings and registration of Gemini Trust, Voyager Digital and Celsius, which has more than $20 billion worth of deposits.


Regulatory action against centralised digital asset companies offering crypto lending accounts would be a logical target, as their corporate structure affords regulators the ability to enforce rules and to collect fines. Conversely, enforcement actions against DeFi protocols and applications will be much more difficult.


Oil Price Shock is a Material Risk for US, European Airlines

The jump in oil prices to around $100/barrel following Russia’s invasion of Ukraine is a material near-term risk for airlines, Fitch Ratings says. Jet fuel represents one of airlines’ largest expense at 20%-30% of total costs. Most US carriers fuel costs are unhedged, while European carriers’ hedging ratios are generally lower than pre-pandemic levels. Travel demand also remains below pre-pandemic levels, possibly limiting airlines’ ability to offset fuel costs with higher ticket prices.

 Airlines have proven their ability to stay profitable when oil prices were higher than current levels. However, margins and cash flows in 2022 will likely be weaker than we expect if crude prices continue to rise or remain high. Leverage and profitability metrics are already strained and projected to remain weak for existing ratings at least through 2022, due largely to the slow recovery in business travel and rising fuel and other costs.

 Fitch does not expect any immediate negative action related to a jump in fuel prices, given good liquidity following the stockpiling of cash during the pandemic and recovering passenger traffic amid waning cases of the Omicron variant. However, a sustained period of higher jet fuel prices may prolong airline recoveries, which could pressure some ratings or delay positive rating actions.

 The war should have minimal direct impact on demand for most Fitch-rated airlines. US and most European carriers have very limited exposure to Ukraine and Russia, while exposure for rated European carriers is not substantial.

 A prolonged conflict could create some hesitancy around travel in Western Europe, but we do not anticipate a material impact at this point. We still expect pent-up demand to drive a recovery to the region this summer, but US domestic carriers remain in a stronger position than carriers with exposure to trans-Atlantic travel.

 Airline cost structures are already under pressure, as carriers are still recovering from pandemic lows and are not yet flying at full capacity. In addition to soaring jet fuel prices, airlines are also experiencing upward pressure on wages and airport costs, while catching up on maintenance items deferred during the pandemic. Multiple airlines have reported recent increases to starting wages for lower-tier employees amid difficulty hiring in a tight labor market. The industry is also absorbing higher crew training costs as new employees are hired to fully staff operations that had been scaled down during the pandemic.

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First Ideas Limited is an investment and financial advisory company established in 1994 to provide advisory services to high net worth individuals, trust funds, financial institutions and medium sized companies in growth sectors.

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