It was a quiet trading session in the bond market, yesterday, with slight demand seen on select maturities (2023, 2028 and 2030). Coupon payments on the FGN 2024 Sukuk and FGN 2025 Bond stimulated marginal buying interest causing benchmark bond yields to slip marginally by c.2bps on the day.
The yield on the 2023 Bond (4.09 TTM) was down by 12bps to 14.46% on the day while the yield on the 2028 Bond (8.92 TTM) slipped by 8bps to settle at 14.31%. Though not a benchmark bond, The 7.00% 23-Oct-2019 Bond created the most value with trades worth N68 billion. However, the yield on the bond advanced by 3bps on the day indicative of some sell pressure on the bond.
Investors in the T-bills market were a little more bullish than Bond market investors as yields on the benchmark bills compressed by c.15bps in yesterday’s trading session. Investor demand was concentrated at the intermediate to long end of the curve (above 190 DTM). The 6th-February bill recorded the highest daily change as its yield dropped by 59bps to settle at 14.28% in trades worth N6 billion.
Similarly, the yields on the 14th-November and 5th-December bills fell by 15bps and 25bps apiece to settle at 14.29% and 14.37% respectively.
In the money market, both the Overnight (OVN) and Open Buy Back (OBB) rates advanced by no less than 800bps each to 24.43% and 22.43% respectively. Speculation around the scheduled debit on banks by the Central Bank (CBN) for premium payments to the Nigerian Deposit Insurance Corporation (NDIC), in addition to funding provisions made for the US$210 million FX wholesale auction conducted by the CBN depleted the liquidity in the interbank market and fuelled a rise in the money market rates.
System liquidity at market open was considerably lower at c.N34 billion relative to an opening liquidity position of c.N175 billion in the previous trading session.
At the official market, the naira lost some steam and depreciated by 0.02% to settle at N306.95/$. However, at the I & E window the naira appreciated marginally (0.01%) as there was a handful of sellers and no major dollar buyers. Offers ranged betweenN357.0/$-N361.5/$ and the naira exchange rate finally settled at N360.39/$ (Previous: N360.43/$).
The bulk of the trades settled between N360-N362/$, however a few trades were consummated at N359/$ levels. Turnover in the I & E window was estimated at US$225 billion, c.3% lower than a turnover of US$231 million in the previous session. Month-to-date, dollar inflows to the tune of US$5 billion have been facilitated through the window and 76% of the inflows originate from internationals as foreign portfolio inflows (FPIs).
Outlook for today
Today, investors in the fixed income market expect the MPC to hold monetary policy tools at current levels. Therefore, we do not anticipate a volatile trading session on the back of a “status quo” decision by the MPC.
Bond market investors are likely to engage in cautious trading ahead of the bond auction on Wednesday while we expect demand interest for t-bills to be constrained by tight system liquidity levels. In the currencies market, we expect the naira to remain firm against other major currencies.
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N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund
ASHON has rejected plans by the Federal Government of Nigeria to manage the N200 million unclaimed dividends.
Some capital market experts, represented by the Chairman of the Association of Securities Dealing Houses of Nigeria, have rejected plans by the Federal Government of Nigeria to manage unclaimed dividends – which is projected to hit N200bn by the end of this year, according to a report by Punch.
The Chairman, Association of Securities Dealing Houses of Nigeria, Onyenwechukwu Ezeagu, explained that capital market regulators and operators had leveraged technology to put in place many initiatives to address the issue of unclaimed dividends. Some of these initiatives include de-materialization of shares, which entails upload of quoted companies share in the Central Securities Clearing System for ease of reconciliation, adoption of e-dividend and e-mandate, consolidation of multiple accounts, identity management engagements, and introduction of electronic Initial Public Offering.
(READ MORE: Nigeria needs $5billion for National Broadband Plan – Chairman, BISC)
What they are saying
Commenting on the recent development, Mr. Ezeagu said, “Generally, the incentives for savers and capital providers in the capital market is the expectation of dividends and capital appreciation.
“It is, therefore, our considered view that the proposed legislation, if passed, will be a great disincentive to savings, long-term capital mobilization, and serious disruption of the Nigerian economy, since it will take away the only expectation of investors in the market.”
Corroborating him, the President, Chartered Institute of Stockbrokers, Mr. Olatunde Amolegbe, said the Securities and Exchange Commission would always ensure the transfer of unclaimed dividends to the capital reserves of the company for restricted utilization, such as capital expansion and issuance of bonus shares to the company’s shareholders.
What you should know
Nairametrics had earlier reported that some law makers (Reps) raised alarm over N200 billion unclaimed dividends in 2020. In lieu of this perceived need, a proposal for the creation of an unclaimed dividend and utilized bank balance trust fund was emphasized in the 2020 Finance Bill — wherein, dividends declared and unclaimed would be warehoused and owed as a perpetual debt to shareholders.
Chapel Hill Denham Nigeria infrastructure debt fund offers up to N20.2 billion
A leading Nigerian investment bank announced Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 Billion
Chapel Hill Denham Advisory Limited and Chapel Hill Denham Management Limited announced the opening of Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 billion under the CHD NIDF’s N200 billion Issuance Programme.
What you should know
The proceeds from the offer will be applied towards infrastructure loans approved by the fund manager’s investment committee.
- It also disclosed that African Development Bank (AfDB), following its announcement in October 2018 to invest in the NIDF, will be committing the Naira equivalent of USD$10 million to the series 7 offer.
- AfDB’s commitment to the NIDF was on the back of a detailed due diligence and review process undertaken by a multi-disciplinary team of AfDB experts.
In the current volatile yield environment, the NIDF still remains a compelling investment outlet, both from a total return and cash yield perspective.
With net assets in excess of N58.6 billion, the Fund continues to deliver consistent and predictable returns, along with principal preservation to investors.
What this means
The cash yield generated by the CHD NIDF has consistently been above the 10-yr FGN. Since its inception in June 2017, the fund has delivered a total return of 82.3% (assuming the cash distributions were reinvested). Total returns for the trailing twelve months (up to September 2020) was 12.4%.
Highlights of the Chapel Hill Denham Nigeria Infrastructure Debt Fund include:
- Entity: Chapel Hill Denham Nigeria Infrastructure Debt Fund
- Fund Manager: Chapel Hill Denham Management Limited
- Structure: Close-ended Unit Trust, regulated by the Nigerian Securities & Exchange Commission. Compliant with PENCOM Investment Guidelines and SEC Rules on Infrastructure Funds.
- Program: ₦200 Billion under which the Units will be issued from time to time
- Series: 7 Offer
- Size: Up to ₦20.24 billion
- Offer: Price ₦109. 58 per unit
- Offer: Units 184,740,440 units
- Minimum Subscription: 100,000 units
- Offer: Open Date November 16, 2020
- Offer: Close Date December 9, 2020
- Listing: FMDQ-OTC
SEC says state governments have borrowed N900 billion from capital market
The SEC has disclosed that state governments have borrowed at least N900 billion from the Nigerian capital market in the last four decades.
The Securities and Exchange Commission (SEC), has revealed that state governments in the country have borrowed at least N900 billion from the Nigerian capital market since 1978.
According to a report from Vanguard, this disclosure was made by the Director-General (DG) of SEC, Mr Lamido Yuguda, at a webinar which was organized by the Nigerian Stock Exchange (NSE) on ways sub-nationals can raise funds through the sale of state-owned enterprises.
The SEC DG who was represented by the Executive Commissioner in charge of Legal and Enforcement, Mr. Reginald Karawusa, revealed that this amount was raised from the capital market through the issuance of debt since 1978.
While speaking on ‘Privatization in Nigeria and the Outlook for Sub-National Economic Development’, the theme of an event organized in partnership with the Nigeria Governors’ Forum (NGF) and the Nigerian Investment Promotion Council (NIPC), he said a huge part of these funds were deployed to financing capital projects and some critical infrastructures for the development of their various states.
He said, “Sub-national issuers in Nigeria have been able to access the debt capital market over the years since 1978, state governments in Nigeria have raised close to N900 billion through debt issuances. A significant part of these funds was deployed to finance capital projects across the country.’’
It must be noted that State governments raise long-term funds from the capital market through bond issuance. In the past, many states including Lagos, Ekiti, Delta, Edo State, Yobe, Osun among others, have raised funds from the market which were basically used for the execution of projects and development of infrastructures.
The SEC boss, however, noted that a drop in allocation from the Federal Government due to significant decline in oil revenue, low level of internally generated revenue and so on, has negatively affected the ability of most of these states to pay salaries after servicing its debts. This has also affected the states’ ability to continue to borrow in a sustainable manner.
On the privatization of state-owned enterprises, Yuguda said, “Several enterprises are still owned and controlled by the government, both at the state and federal levels. A number of these entities have the capacities to generate cash flows and corporate profitability.’’
He noted that privatization is a way for governments to unlock economic potentials inherent in these state-owned enterprises.
It must also be noted that raising these funds from the capital market which are needed badly for development, will be good for transparency, meet the financial obligation and good for funding of capital projects for development. Such improved infrastructure can help increase the internally generated revenue.