About 21 states in Nigeria attracted zero investments in the last 4 months according to data from the Central Bank of Nigeria.

According to data, the following states, Rivers, Ondo, Edo, Sokoto, Oyo, Abia, and Anambra recorded zero capital importation in the last 4 months. Others are Adamawa, Bauchi, Benue, Borno, Cross River, Delta, Ebonyi, Enugu, Imo, Kastina, Kogi, Kwara, Osun, Oyo, Yobe, and Nassarawa states.

This information is contained in the Capital importation report obtained from the Central Bank of Nigeria, CBN. The report also detailed the total amount of fresh investments attracted to the Nigerian economy during the period.

[READ MORE: States’ IGR hits N691 billion as Osun, others recorded biggest growth]

Note that most of the states that failed to attract investments during the period under review also failed to attract any investments in 2019. This means that it is either the necessary steps were not taken by the governments, or foreign investors could not find attraction in the states or the environments were simply not conducive for investment.

Lagos outshines FCT, Niger, 5 other states

As expected, Lagos topped the list of states that attracted investments during the period under consideration. Lagos attracted the highest amount of $5.39 billion during the period. The investment inflow into the state represents over 87% of the $6.17 billion.

Lagos is followed by the Federal Capital Territory which attracted a total investment inflow of $754.01 million.

Niger State attracted a total investment inflow of $11.60 million. Sokoto State also attracted $2.50 million, while Kaduna State attracted the sum of $1.98 million and Ogun attracted $1.70 million.

Kano and Akwa Ibom states recorded investment inflow of about $700,000 and about $237,000 respectively among others.

The limited investment inflows into some of these states clearly indicate that the states are not really attractive to the investors, even before the pandemic. The Managing Partner, FA Consult, Peter Adebayo, explained that the nation’s economy is not attractive enough to pull investments to states that lack the desired viability.

“Most of the investors are scared of insurgencies in the country, though such is limited to some parts of the nation, except for the well-connected investors that are given special attention,” he said.

Back story: Last March, Nairametrics reported that Ekiti, Kogi, Sokoto, Bayelsa, Ebonyi, Gombe, Jigawa, Abia, and five other state governments failed to attract investments in 2019.

Custodian Investment announced on Monday to acquire a 51% stake in UPDC, a real estate company owned by UACN. This is confirmed in a press release posted on the website of the Nigerian Stock Exchange.

UACN announced plans to spin off its investment in UPDC in 2019 after multiple years of losses and value accretion threatening to undermine the going concern status of the parent. Last June, UPDC announced it has raised N16 billion from the right issue as it prepared for its unbundling.

In separate press releases between Custodian and UACN, the duo agreed to a sale of 51% or 9, 465, 584, 668 ordinary shares of UPDC in a transaction that will occur in two phases.

Deal Details

• An initial sale of 5.1% of UPDC will be sold to Custodian Investment
• The second sale of 45.9% of UPDC will then be sold to Custodian Investment
• The companies did not reveal timelines for the consummation of the deal
• Due to this deal, UACN will stop its unbundling plans for UPDC
• The deal is subject to regulatory approvals.
• The purchase consideration was yet to be disclosed, however, UPDC has a market capitalization of N15 billion while Custodian has a Market Capitalization of N30 billion as at press time.

What they are saying

The CEO of Custodian, Wole Oshin and his counterpart in UACN, Folasope Aiyesimoju also commented on the transaction providing reasons for consummating the deal.

• According to Wole Oshin of Custodian Investment, “The rationale for the Transaction is that Custodian and UAC share the view that their ambitions for capturing opportunity in the real estate industry will be better achieved working in partnership.”
• Custodian also believes the transaction “will provide Custodian with a platform to capture arising real estate opportunities. It also immediately provides recurring cash flow visibility and attractive yields as a result of its direct exposure to Nigeria’s leading real estate investment trust (“UPDC REIT”) with a track record of profitability and annual dividend distribution which offers a good compliment for our product portfolio.”
• According to Folasope Aiyesimoju, Group Managing Director of UAC, “UAC received a credible offer from Custodian. The terms of the offer compelled the Board to re-evaluate the planned approach to de-consolidate UPDC and influenced the Board’s decision to proceed with the sale of a portion of UAC’s interest in UPDC to Custodian, effectively putting an end to the UPDC Unbundling.”

What they stand to gain from this deal

The two companies also revealed what they stand to gain from this transaction. According to Custodian, it decided to acquire for the following reasons;

• The company claims it is attracted to the ‘recurring cashflow visibility from UPDC REIT citing the huge cash flow it hopes to enjoy from rental income
• “The UPDC REIT is highly cash generative with recurring income streams. It has distributed an average of N1.4 billion p.a. over the last five years. Rental income from UPDC REIT is underpinned by leases with first-tier tenants. This presents a good match for our business.”
• Custodian also mentions the N10 billion in assets for sale on the books of UPDC which it will focus on “realising”.
• For UAC, while it will no longer be pursuing its deconsolidation strategy for UPDC, it will still retain part ownership of the company but will cease to have it as a subsidiary of UAC operating as a standalone.
• UPDC will now be a subsidiary of Custodian Investment.

UPDC’s Challenges

• UPDC reported a loss after tax of N15.8 billion in 2019 and has accumulated over N33 billion in losses since 2016.
• However, its REIT business has faired better reporting a pre-tax profit of N816.5 million in the first half of 2020. It has consistently declared dividends.
• UPDC collected about N956 million in cash distribution from UPDC Reit in 2019 alone.
• UPDC has undergone several restructuring since Themis Capital acquired majority ownership in UACN in 2018. However, it was unable to stop the hemorrhaging of losses.

Nigeria’s exchange rate at the NAFEX window appreciated to N388 during intraday trading on Monday, August 3, 2020. In a similar situation, the exchange rate at the parallel market appreciated on Monday as well to close at N473/$1.

Cumulative forex turnover for the month of July was $937 million compared to $875 million in June.

Market Watch

Parallel Market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N473/$1 on Monday, according to information from Abokifx, a prominent FX tracking website. This represents a N2 gain when compared to the N475/$1 that it exchanged on Wednesday, July 29. Some traders contacted by Nairametrics research also confirmed the price as N480/$1.

However, due to the 2 day Sallah holidays, Nairametrics research reported that the naira exchanged for as high as N485 to a dollar on Friday, July 31.

READ MORE: Why Nigeria’s low tax collection rate can’t be fixed just yet

NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N388/$1. This represents a N1.25 gain when compared to the N389.25 rate close that was reported on the last trading day, Wednesday, July 29.  The opening indicative rate was N388.33 to a dollar on Monday. This represents a 28 kobo gain when compared to the N388.61 to a dollar that was recorded on Wednesday.

The naira fell to as high as N390 during intraday trading before strengthening to the closed rate of N388. It also sold for as low as N380/$1 during intraday trading. Forex is sold at several prices during the day.

Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline on Monday, August 3, 2020, as it dropped by 8.5% day on day. According to the data tracked by Nairametrics from FMDQ, forex turnover decreased from $18.83 million on Wednesday, July 29, 2020, to as low as $17.23 million on Monday, August 3, 2020.

The average forex sale for last week was a low volume of about $32 million which is slightly better than the $27 million that was recorded the previous week. We also noted that on no day last week did we record a sale close to or above $50 million. FX turnover which was subdued last week did not show any sign of recovery as Nigeria finished the two-day Sallah holiday.

Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.

READ: Exchange rate depreciates at the NAFEX window as dollar scarcity persists

Exchange rate disparity

The exchange rate disparity between the official NAFEX rate and the black-market rate remained wide on Monday staying as wide as N85. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window).

Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.

The minister of Finance also admitted that Nigeria was seeking unification of its forex Windows, a move thought to be in line with the requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion. The country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.

READ ALSO: A breakdown of how some billionaires gained and lost money last week

COVID-19 Pressures

Nigeria’s airspace remains closed to commercial international flight operations and won’t be open till October 2020. Foreign Travel has often been a source of demand for the greenback.

• The recent demand for dollars at the parallel market is thought to be fueled by speculators.
• The parallel market also caters to forex trades through wire transfers especially for buyers who cannot fulfil their dollar demands at the I&E window or the SMIS window.
• The exchange rate for wired transfer is often at a premium to the black market rate.

Get aggregated data from Nairametrics

Forex Challenges: Last few weeks have been most challenging for the foreign exchange market as it witnessed very low liquidity. The downward slide against the greenback and some other major currencies continued this week due to tightened liquidity in the system.