FG raises N4.46trn bonds in 8 months

The Federal Government raised the sum of N4.46 trillion from the bond market in the last eight months. The result is that the interest rate on 30-year FGN bonds increased to 15.85 per cent in August 2023 from 14.3 percent in July 2023. The Debt Management Office (DMO) received N5.42 trillion total subscriptions as against N2.88 trillion offered during the period amid monetary policy tightening by the Central Bank of Nigeria (CBN) and global uncertainties. An analysis of the bond market activity during the period revealed that FGN bonds recorded 53 percent oversubscription as interest rates continued on a steady trajectory. The DMO has conducted four auctions in 2023, which were oversubscribed despite a hike in inflation rate and investors’ diversification into the stock market. While the information on the buyers of corporate bonds are publicly disclosed, other publicly available reports indicate Pension Fund Administrators (PFA), asset managers, banks, and institutional/foreign investors are among the largest buyers of FGN Bonds. The auction results released by DMO indicate strong investors’ demand for FGN bonds, as the total amount allotted exceeded the total amount offered. It also suggests investor confidence in the Nigerian economy and the ability of the government to meet its debt obligations. A breakdown showed that in the first quarter (of 2023, total subscription to FGN bonds stood at N2.61trillion while the DMO allotted N1.996 trillion out of the N1.080 trillion offered to the investing public. In the second quarter of 2023, investors were also offered N1.080 trillion FGN bonds; it witnessed N2.503 trillion subscriptions. The DMO eventually allotted N2.23trillion. However, a July 2023 auction revealed that subscriptions stood at N945.14billion as against the N360 billion offered. The DMO allotted N657.84 billion. At the just concluded FGN bond auction in August, the four instruments were 14.55 per cent April 2029 FGN bond; 14.70 per cent June 2033 FGN bond; 15.45 per cent June 2038 FGN bond; and 15.70 per cent June 2053 FGN bond. They were valued at N90 billion each, making a total offer of N360 billion. In spite of current market conditions, the auction received a total subscription of N312.56 billion and amount allotted to successful bidders for the four instruments was N230.26 billion. Investors’ appetite for the 15.70 June 2053 (30-year bond) remained strong, with a bid-to-cover ratio of 2.71 times. Allotments were made at 13.85 per cent for the 14.55 per cent April 2029 instrument and 15.00 per cent for the 14.70 per cent June 2033 instrument. Also, “15.20 per cent was for the 15.45 per cent June 2038 instrument and 15.85 per cent for the 15.70 per cent June 2053 instrument,” the DMO said. The federal government had proposed to borrow over N11 trillion to finance the proposed 2023 budget deficit. Findings by Economic Confidential revealed that FGN Bonds auctioned were re-openings with rates below the inflation rate. The debt office in 2023 maintained four tenor bond auctions between January and June and each FGN bond offer was oversubscribed. Meanwhile, finance experts have attributed the strong demand for FGN bonds to attractive yields, which offer investors high returns on their investments. They added that the oversubscription also revealed that investors have confidence in the government’s ability to meet its debt obligations. The appetite for FGN bonds indicates that PFAs, and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment. But, in recent years, Nigeria’s rising debt profile has been a topic of concern, as Vice President, Highcap Securities Limited, Mr. David Adnori warned that the country’s debt levels are unsustainable. DMO stated in January that Nigeria’s public debt could rise to N77 trillion if the country’s “ways and means” are securitized. “Ways and means” refer to the CBN’s lending to the federal government. The DMO said that the securitization of ways and means” is not unusual and is a common practice in many countries, but it is not a decision that can be made by the DMO alone. Adnori expressed concerns that Nigeria’s rising debt levels could become unsustainable if not managed properly. The government has argued that borrowing is necessary to finance critical infrastructure projects and stimulate economic growth. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the FG had notified the general public of borrowing more in 2023. According to him, “With all the volatility and foreign exchange issues, it makes sense to borrow at the domestic market rather than borrowing from the international market. It is all a reflection of our macro economy environment challenges and weak fiscal policy of the government. All this borrowing also is a reflection of the weak financial position of the government and it will continue like that.” He noted that the oversubscription to FGN bond is a lucrative investment, stressing that the low risk involved attracted investors. He added, “Anything sovereign has the lowest risk and nothing will go wrong with it except the country is collapsing completely. All over the world, sovereign bonds have the lowest risk and secondly it is an investment outlet for investors to invest their money.” On his part, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said, “We know that previous government borrowing was high. Excessive borrowing by the previous government at the expense of the private sector, which is the engine room of the economy, brings to question the soundness of their economic strategy. “The careless use of debt as a financing tool is fraught with calamitous dangers. Even more disheartening is when the debts are principally used to finance consumption or to unwisely finance a few secondary infrastructures (Roads and Rail). “These will neither enhance the productive momentum of Nigeria’s light industries nor make the economy self-reliant. The disorderly growth of the economy the last administration pursued can only mislead the country into an abyss if public borrowing is not curtailed to lower cost of funds so that production will be competitive.”

NGX moves northward, gains N565bn

Trading activities on the floor of the Nigerian Exchange on Thursday closed northward, gaining N565 billion following gains recorded by Dangote Cement, Unilever, Cadbury Nigeria Plc, FBNHoldings among others. The market capitalisation of equities on Thursday appreciated by 1.62 per cent to close at N35.483 trillion from N34.918 trillion reported the previous day. The NGX All Share Index also appreciated by 1037.43 basis points to 65204.82 points from 64167.39 points traded on Wednesday. A reviews of the investment during the day showed that Chellaram Plc led gainers table in percentage terms, gaining 10 per cent to close at N4.40 per share, SCOA Plc followed with a gain of 9.35 per cent to close at N1.17 per share, Dangote Cement gained 9.34 per cent to close at N349.90 per share, Thomas Way added 9.32 per cent to close at N1.29 per unit, Cornerstone Insurance increased by 9.09 per cent to close at N1.08 per share. On the contrary, Cap Plc topped losers chart, shedding 10 per cent to close at N19.80 per share, Academy Press trailed with a loss of 9.36 per cent to close at N2.13 per unit, Dangote Sugar Refinery dipped by 6.63 per cent to close at N32.40 per unit, Glaxo Smithkline fell by 6.60 per cent to close at N9.20 per share, Chams Plc down by 5.05 per cent to close at N0.94 per share. Volume of trades increased by 123.16 million, representing 51.73 per cent as investors traded 361.197 million shares valued at N5.743 billion in 5531 deals against 238.039 million shares worth N2.616 billion in 6001 deals. Transactions in the shares of FBNHoldings Ltd market activities with 140.179 million shares valued at N2.608 billion in 280 deals, Fidelity Bank followed with account of 21.559 million shares worth N165.186 million in 170 deals, Universal insurance traded 18.706 million shares valued at N4.211 million in 62 deals. Transnational Corporation of Nigeria exchanged 17.307 million shares valued at N62.606 million in 176 deals while United Bank for Africa exchanged 13.081 million shares costing N188.990 million in 249 deals.

DMO auctions FGN bonds worth N360bn

The Debt Management Office (DMO), acting on behalf of the Federal Government of Nigeria (FGN), has recently conducted an auction for the subscription of four FGN bonds valued at a total of N360 billion for the month of August 2023. As outlined in the offer circular released by the DMO on Thursday, the first bond on offer is an April 2029 FGN bond, with a value of N90 billion and an interest rate of 14.55 percent per annum. This particular bond constitutes a 10-year re-opening of the existing issue. Similarly, the second bond available for subscription is a June 2033 FGN bond, also valued at N90 billion, and carrying an interest rate of 14.70 percent per annum, serving as a 10-year reopening. Furthermore, the DMO has presented a June 2038 FGN bond, valued at N90 billion, with an interest rate of 15.45 percent per annum. This bond represents a 15-year reopening of a previous issuance. The last offering is the June 2053 FGN bond, also valued at N90 billion, and featuring an interest rate of 15.70 percent per annum. This bond represents a 30-year reopening of the original issuance. “They qualify as securities in which trustees can invest under the Trustee Investment Act “They qualify as government securities within the meaning of the Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds amongst other investors. “They are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange. “All FGN bonds qualify as liquid assets for liquidity ratio calculation for banks,” the DMO said.  All of the mentioned FGN bonds are available for subscription at a unit cost of N1,000, with a minimum subscription requirement of N50 million and subsequent subscriptions in multiples of N1,000. For bonds that are re-openings of previously issued bonds with fixed coupons, bidders are expected to pay a price corresponding to the yield-to-maturity bid that successfully clears the auction volume, along with any accrued interest on the instrument. Interest on these bonds is paid semi-annually, and the principal repayment is set as a bullet payment due on the maturity date. It’s noteworthy that FGN bonds enjoy the full backing of the Federal Government’s faith and credit, with their security secured by the general assets of Nigeria. These FGN bonds have multiple benefits, including qualification as securities in which trustees can invest under the Trustee Investment Act. They also fall under the category of government securities in accordance with the Company Income Tax Act and Personal Income Tax Act, qualifying for tax exemptions for pension funds and other investors. Additionally, these bonds are listed on both the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange. Furthermore, all FGN bonds are considered liquid assets for the calculation of liquidity ratios for banks. The DMO’s auction of these FGN bonds reflects the government’s continued efforts to manage its debt and financial obligations while providing investment opportunities for both institutional and retail investors.

Nigeria’s equity market begins week positively with N76bn gain

The Domestic equity market opened the week on a positive note, gaining N76 billion following gains recorded by small and medium stocks. The market capitalisation of listed equities increased by 0.21 percent to N35.555 trillion from N35.479 trillion reported on Friday. The NGX All Share Index also appreciated by 138.63 basis points to 63336.71 points from 65198.08 points traded the previous day. An analysis of the investment showed that Enamalwa led gainers table during the day, gaining 9.86 per cent to close at N19.59 per share Wema Bank followed with a gain of 9.77 per cent to close at N4.72 per share, UPL also appreciated by 9.73 per cent to close at M2.48 per unit, SUNU Assurance added 9.68 per cent to close at N1.02 per share Gkaxosmith gained 9.55 per cent to close at N9.75 per unit. On the contrary, Omatek topped losers chart during the day in percentage terms, shedding 8.82 per cent to close at N0.31 per unit, Prestige insurance trailed with a drop of 7.84 per cent to close at N0.47 per unit, Mcnichols fell by 7.35 per cent to close at N0.63 per share, Cornerstone Insurance declined by 7.22 per cent to close at N0.90 per share, Wapic Insurance dipped by 5.97 per cent to close at N0.63 per unit. Volume of trades declined during the day as investors traded 334.333 million shares valued at N3.891 billion in 6940 deals against 363.147 million shares worth N6.073 billion in 6644 deals. Transactions in the shares of Sterling Bank Plc led market activities during the day with 55.141 million shares valued at N197.266 million, FCMB group followed with account of 28.249 million shares cost N173.843 million, Fidelity Bank exchanged 18.842 million shares cost N150.847 million. Japaul Gold traded 17.355 million shares cost N17.018 million while AccessCorp exchanged 17.100 million shares cost N296.635 million.

Naira appreciates 4.31% at investors, exporters window

On Friday, the Naira displayed a remarkable appreciation of 4.31% against the dollar at the Investors and Exporters window, reaching an exchange rate of N743.07. This significant gain was in contrast to the previous day’s rate of N776.50. The open indicative rate also closed favorably at N782.28 to the dollar on the same day. During the day’s trading, the spot exchange rate peaked at N799 to the dollar before ultimately settling at N743.07. Interestingly, the Naira was observed to have been sold as low as N475 to the dollar within the same trading session, indicating some fluctuations in the market. The Investors and Exporters window witnessed substantial activity, with a total of $121.08 million being traded on Friday. This volume of transactions reflects the ongoing dynamics in the foreign exchange market and the interests of investors and exporters in Nigeria’s currency market. The Naira’s gain at the Investors and Exporters window indicates some positive sentiment and demand for the local currency in recent trading activities. However, it is essential to keep an eye on market conditions and various economic factors that could influence future fluctuations in the exchange rate. As with any currency, the Naira’s value can be influenced by factors such as the country’s trade balance, foreign direct investments, foreign reserves, and government monetary policies. A stable and competitive exchange rate is crucial for the Nigerian economy to attract foreign investments, ensure price stability, and enhance international trade. Overall, market participants, investors, and policymakers will continue to closely monitor the Naira’s performance in the coming days to gauge the currency’s strength and stability in the face of economic challenges and global market trends.

Domestic equity market gains N542bn

Nigeria’s domestic equity market on Thursday sustained its upward trade story, growing by N542 billion. The market capitalisation of listed equities increased by 1.55 percent to N35.515 trillion from N34.973 trillion reported the previous day. The NSE All Share Index also appreciated by 995.70 basis points to 65263.06 points from 64267.36 points reported the previous day. A review of the investment showed that Nigerian Breweries, Sterling Bank, and PZ Cusson led the gainers’ table with 10 percent each to close at N41.80 per share, N3.63, and N18.15 per share respectively. Chellaram Plc added 9.96 percent to close at N3.05 per unit, Dangote Sugar added 9.95 percent to close at N35.90 per unit. On the contrary, Eterna Plc topped the losers’ chart, dropping by 9.83 percent to close at N23.40 per share, JohnHolt trailed with a drop of 9.82 percent to close at N1.47 per unit, Thomas Way fell by 9.40 percent to close at N1.06 per share, Mcnichols dipped by 9.33 percent to N0.68 per unit, Courtvellle Business Solutions down by 9.09 percent to close at N0.60 per unit. The volume of transactions increased by 114.491 million, representing 34.61 percent as investors traded 445.275 million shares worth N5.087 billion in 7095 deals, against 330.784 million shares cost N4.269 billion exchanged hands the previous day in 6251 deals. Trading in the shares of Sterling Bank led market activities with 69.452 million shares valued at N238.093 million, FCMB group followed with account 33.332 million shares cost N217.816 million, AccessCorp traded 32.985 million shares valued at N568.981 million, Japaul Gold traded 28.366 million shares cost N28.846 million, Fidelity Bank exchanged 27.351 million shares cost N219.595 million.

DMO lists N130bn Sukuk to boost capital market

The Debt Management Office (DMO) of the Presidency has announced the listing of N130 billion sovereign Sukuk on the Nigerian Exchange and FMDQ starting on August 8, 2023.This was disclosed in a statement from the Debt Management Office (DMO). The Federal Government has been able to fix 75 roads since the FGN Sukuk initiative started. Some of the roads include Ibadan-Ilorin Road, Kaduna Eastern Bypass, and Loko Oweto Bridge over the River Benue among others.  The listing follows the successful oversubscription of the N100 billion opened in November 2022. This current listing is geared towards accommodating the needs of investors towards the facility.  According to the statement, “The sovereign Sukuk was opened for subscription in November 2022, with an initial of N100 billion however, it garnered immense interest from investors with a remarkable subscription level of N165.25 billion which represents over 165% of the amount offered. To accommodate the need of diverse investors who subscribed to the Sukuk, N130 billion was allocated.  Sukuk bonds are investment certificates representing ownership of the holder in an asset. Since 2017 when the Federal government began issuing sovereign Sukuk, the DMO has raised about N742.55 billion whose proceeds have been used for road construction and other infrastructure projects across the country.  The last DMO issued Sukuk in 2017 had an interest return of 16.47% with a tenor of 7 years. It was used in the construction of roads across the six geopolitical zones of Nigeria.  According to the DMO release, “the listing of the N130 billion sovereign Sukuk on the NGX and FMDQ securities exchange will expand the range of financial offerings available to investors in the capital markets.  “The opportunity to buy and sell the sovereign Sukuk will provide liquidity to investors and promote price discovery,” it noted. 

Nigeria’s equities bounces back, gains N41bn

Transactions on the floor of the Nigerian Exchange (NGX) on Wednesday closed on a positive note, appreciating by N41 billion.  The market capitalisation of listed equity appreciated by 0.12 percent to N34.973 trillion from N34.932 trillion reported the previous day. The NGX All Share Index also increased 75.16 basis points to 64267.36 points from 64192.20 points traded the previous day. A review of the investment showed that Nascon, Chams Plc, and Abbey Building Society led the gainers’ table in percentage terms, gaining 10 percent to close at N35.75 per share, N0.99 and N1.21 per share respectively. Skyways Aviation Handling followed with a gain of 9.96 percent to close at N28.15 per share, and Dangote Sugar Refinery added 9.93 percent to close at N32.65 per unit. On the other hand, Thomas Way and TIP topped the losers’ chart with a drop of 10 percent each to close at N1.17 and N0.72 per share respectively. UPL trailed with a loss of 9.78 percent to close at N2.49 per unit, Omatek fell by 9.76 percent to close at N0.37 per share, JohnHolt was down by 9.44 percent to close at N1.63 per share. Volume of trades declined by 431.313 million, representing 56.60 percent as investors traded 330.784 million shares valued at N4.269 billion in 6251 deals against 762.097 million shares worth N7.710 billion in 7935 deals. Trading activities on the shares of Transnational Corporation of Nigeria (Transcorp) led market activities with 58.829 million shares worth N209.186 million, FBNHoldings followed with an account of 27.951 million shares cost N502.759 million, Ecobank Transnational Incorporate traded 21.303 million shares cost N330.246 million, AccessCorp exchanged 20.697 million shares cost N34.178 million while Chams Plc traded 16.964 million shares valued at N16.135 million.

Stock market swells N867.7bn, as forex gap widens across trades

The Nigeria Exchange (NGX) last week grew by an additional N867.7 billion to cap at N35.7 trillion. All Share Index (ASI) rose by 0.1 percent. This is as the crude oil price rise in the international markets failed to grow the country’s foreign reserves, leading to a widening gap across markets. At the domestic stock market, Year-to-Date (YTD) return improved to 26.9 percent (previously 26.8 percent). Activity level dampened as average volume and value traded fell 31.7 percent and 62.0 percent to 570.9 million units and N7.5 billion week-on week (w/w) respectively. At the global equities market, resilient corporate earnings encouraged bullish sentiment. Last week, the global equities market performance was shaped by a mix of the International Monetary Fund (IMF’s expectation of a better growth in China, unsurprising rate hikes by the US Feds and European Central Bank (ECB), and exciting corporate earnings. Overall, the MSCI World index rose 0.3 per cent w/w. The US market closed the week positive as investors continued to digest impressive corporate earnings releases and recent economic data. Specifically, PCE headline inflation slowed to 3.0 per cent in June from 3.8 per cent in the prior month – further solidifying expectations of the Fed to halt its ongoing hawkish monetary campaign. A the foreign exchange (fox) market, Brent crude oil price rose 3.9 per cent w/w to $84.00/bbl. backed by strong demand from the Sino economy as it reopens economic activities. This also comes with supply being artificially contained by OPEC+ members and frail supply pulls from the US. “Meanwhile, Nigeria’s foreign reserves still falls short of expected accretion from crude earnings as it declined 0.1 per cent w/w to $33.9 billion as of July 26th, 2023”, said analysts at Afrinvest. Across the forex market last week, naira traded within a similar band to the previous week. At the Investors & Export (I&E) window activity level improved 8.3 per cent, 32,3 million to $421.6 million, leading to 0.3 per cent w/w appreciation of the naira N775.76/$. In the parallel market the dollar appreciated 0.6 per cent w/w to N870/$, bringing a weekly average spread increase of 60.6 per cent to N89.02. At the treasury bills market, the OPR and OVN rates (interbank rates) fell 19.5ppts and 19.6ppts w/w respectively to 0.9 per cent and 1.4 per cent due to buoyant system liquidity. Specifically, liquidity level advanced 180.2 per cent  w/w to N593.0bn as higher opening balances of banks (9.0x w/w) and Federal Account Allocation Committee (FAAC) payment largesse more than offset NT-Bills outflows of N264.3 billion during the week. The secondary market for domestic bond instruments closed the week on a bearish note as investors reacted negatively to the outcome of the MPC meeting. As such, average yield rose three basis points (bps) to 12.8 per cent backed by repricing across the curve. Specifically, yield on the short, mid, and long-dated instruments expanded by 145bps, 25bps and 19bps respectively.