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SEC and CBN set to re-modify rules on margin lending

The two regulators also intend to start issuing margin loans in accordance with the new rules they would set.

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SEC, Primary and secondary school students to start taking classes on Capital Market 

The Securities and Exchange Commission (SEC) is working in collaboration with the Central Bank of Nigeria (CBN) to change the guidelines on margin lending. The two regulators also intend to start issuing margin loans in accordance with the new rules they would set

They intend to add banking shares – The Acting Director of SEC, Ms Mary Uduk, disclosed this in Lagos while speaking during the first quarter post-Capital Market Committee, (CMC) media briefing. She also disclosed that they intend to re-include banking shares in the margin list.

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Reason for the amendment

Uduk explained that the rules guiding margin lending had to change, especially after zero activity was recorded in the sector since the rules were created in 2010.

“After the meltdown, in 2010, the SEC and CBN came together to come up with rules on margin loan but after the issuance of that rules, we found out that there was zero activity in respect of margin loan and that is why the market suggested that it appears the rules on margin loan is very stringent.

“In coming up with that rule, probably due to the experience of the past, we excluded banking shares from margin list. We found out from other jurisdictions that you can be given loans to buy banking shares, so, because of that, we started engaging CBN.”

What is a margin loan?

A margin loan is a type of loan that allows you to borrow money to invest, by using your existing shares, managed funds and/or cash as security. It is a type of gearing, which is borrowing money to invest.

How does it work?

A margin loan uses existing shares, managed funds and cash as security. These existing assets are used to calculate your Loan to Value Ratio (LVR), which determines how much you can borrow.

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Once your borrowing limit is established, you can use available funds to purchase further approved investments (shares, managed funds etc). Your new and existing investments are combined to form your total portfolio.

Interest on a margin loan is calculated daily, but how it is paid will depend on the loan. Some margin loans allow interest to be paid in advance.

What is the LVR – The Loan to Value Ratio (LVR), is the amount of your loan divided by the value of the shares or managed funds being used as security.

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Business News

AfDB board denies asking Adesina to step down, as Obasanjo says the bank risks being hijacked

“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign.”

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AfDB partners DFID to unveil $80m infrastructure financing for Africa, ADB launches $3 billion “Fight COVID-19” Social Bond, US calls for an independent probe of AfDB president, Akinwumi Adesina, AfDB board denies asking Adesina to step down as Obasanjo says the bank risks being hijacked

The Bureau of the Board of Governors of the African Development Bank (AfDB) has denied media reports making the rounds that AfDB’s president, Akinwumi Adesina, has been asked to step down pending the completion of the probe and determination of allegations against him.

The bank’s top governing board members said that they have not asked Adesina to step down from his position as president, even as the board continues to review the fallout of complaints by some whistleblower. The statement from the Chairman of the bank’s board of governors, Niale Kaba, said:

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“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign. All governors will be carried along in resolving the issue.’’

Kaba also stressed that there was no governance crisis at AfDB as was being speculated in certain quarters. He confirmed that the Bureau of the Board of Governors of AfDB met on Tuesday, May 26, after the request by the U.S Secretary calling for an independent probe. The essence of the meeting was to take a closer look at the allegations by the whistleblowers against Akinwumi Adesina, said allegations which had already been investigated by the ethics committee of the bank.

Kaba further disclosed that even though no decision has been taken yet, the bureau assures that it is treating the case with the utmost seriousness that it deserves.

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(READ MORE:  AfDB bows to pressure from U.S, orders an independent probe of Akinwumi Adesina)

Adesina, who maintains his innocence of those allegations, had stated that a fair, transparent, and just process will vindicate him.

In a related development, former Nigerian President Olusegun Obasanjo had thrown his weight behind Adesina and kicked against the demand by the United States of America for a fresh, independent probe of the AfDB President who had earlier been cleared by the ethics committee of the bank.

In his letter to 12 former African Presidents, Obasanjo said that Africa must stand up and not allow its institutions to be unduly controlled by non-African countries.

Obasanjo said that the bank has witnessed tremendous growth under Adesina’s leadership and has doubled its capital base since he took over.

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Economy & Politics

How N400 billion ecological funding can save Nigeria’s coastline

The waves of current from the ocean have become more violent, eroding the nation’s coastline which poses a serious threat.

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How N400 billion ecological funding can save Nigeria’s coastline

With the higher rainfalls predicted for the year 2020, states in Nigeria may have to worry about something more serious than a flood – the erosion of the coastlines.

According to Mr Kabiru Abdullahi, Lagos State Commissioner for Water Front Infrastructure Development, the waves of currents from the ocean have become more violent, eroding the nation’s coastline and compounding environmental degradation, and flooding.

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This development is already posing serious threats to several parts of Lagos state, which is known to be a coastal city.

According to NAN, the state government had already constructed 18 groins to wade off the violent currents from the oceans, but Abdullahi admitted that given the current situation, there is a need to construct at least 60 more groins.

These groins, he explained, would act as breakers, trapping sand from moving down the beaches.

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(READ MORE:Lagos State conducts social media poll on whether to lock down or not.)

What can N400 billion do to save the situation

Coastline erosion is a seasonal problem which will always occur when there is a rise in sea level, as is expected during the rainy season. If the government does not armour the shorelines with seawalls, jetties and groins, there could be more property and land losses.

How N400 billion ecological funding can save Nigeria’s coastline

According to the commissioner, N400 billion would be just enough to construct groins to cover another 60 kilometres in addition to the 7.2 kilometres done so far.

“On the Eko Atlantic City Project, so far, 18 groins have been constructed at 400 metres intervals covering a distance of about. We still have about 60 kilometres to go which is estimated to cost about N400 Billion,” he said.

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The Ecological fund is an intervention fund set up by the Federal Government to address the various environmental challenges in communities across the country, but interestingly, the Lagos state government has not accessed any ecological fund on this project so far.

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(READ MORE:Fourth Mainland Bridge to begin before December)

Lagos state budget for 2020 was put at N1.17 trillion with environment getting N66.586 billion of the sum. With this sum, there is no way the ministry of environment can take on the task of funding a N400 billion project on coastline and shoreline protection, and this is only one of the numerous environmental challenges the state has to deal with. The state budget has even been reviewed downwards in view of the COVID-19 induced economic challenges.

Illegal dredging activities and land reclamation for urban development are also creating serious environmental issues for Lagos and left on its own, and without intervention funding from the federal government, the coastline situation could be left to deteriorate even further with the onset of the rain

As the commissioner suggested, the federal government might want to consider allocating some of the “recently released tranche of Abacha loot of about $313 million” for this purpose, as it no doubt qualifies as a critical infrastructure for the country.

 

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Economy & Politics

New OPEC+ output cut proposal may stall if Russia …

OPEC is weighing the possibility of continuing with the current level of OPEC+ production cuts till the end of the year in order to support the oil market.

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OPEC+ Alliance, US, Russia, Canada, Mexico reach historic deal to cut 13.4 million bpd, Oil market still uncertain over the OPEC+ deal as prices react positively, 7 oil producing countries most affected by covid-19, see where Nigeria is placed

Some members of the Organization of Petroleum Exporting Country (OPEC) and Saudi Arabia are considering extending the historic production cuts of almost 10 million barrels per day beyond June.

They are weighing the possibility of continuing with the current level of OPEC+ production cuts till the end of the year in order to support the oil market; however, they are yet to get the support of Russia.

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Russia could be a stumbling block to sustaining the output cut deal beyond June, though OPEC+ and top oil-producing countries had pledged in April to restrict production to 9.7 million barrels per day in May and June, and then 7.7 million barrels from July to December.

According to reports, Saudi Arabia is pushing for the deeper 9.7 million barrel per day output cut to be extended beyond June up to the end of 2020, in order to rebalance the oil market, which is still bedevilled by a lot of uncertainty and volatility.

(READ MORE: Now that Oil is back)

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Russia on its part, which is a key ally to OPEC has been non-committal on this plan. The Russian government on Tuesday approved a plan to increase oil production as soon as the OPEC+ deal ends. This they hope to achieve by having new oil wells drilled this year and in 2021 for 2022 production.

According to a report from oilprice.com, Saudi Arabia believes the oil market still needs support and wants to continue with the current output cut until the end of the year. Russia wants the same, but the major challenge is with the oil companies who had failed to reach any agreement at their meeting on Tuesday.

About half of the Russian oil firms support the extension of the current output cut while the other half are against the extension but rather calling for the continuation of output cut that was earlier agreed by OPEC+. As a result, Russia is typically non-committal and would wait to see how much oil demand will recover.

 

 

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