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Market Update: Nigerian Eurobond Prices plunge amid escalating US trade tensions

Welcome to Nairametrics‘ summary of the daily performance of major economic indicators and highlights from trading sessions and key statistics such as Treasury Bills and Bonds. This is brought to you by Zedcrest.

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Treasury Market T-bills

Welcome to Nairametrics‘ summary of the daily performance of major economic indicators and highlights from trading sessions and key statistics such as Treasury Bills and Bonds. This is brought to you by Zedcrest.

This report is dated May 31stth, 2019.

***Oil falls 3% on fresh trade worries, set for the biggest monthly drop in six months***

 Key Indicators

Bonds: Bond yields retrace slightly today, on the back of some demand interests mostly on the short end of the curve, which was largely due to the lack of an OMO auction by the CBN. Yields were consequently lower by c.5bps, with slight demand also witnessed on the 28s and 37s.

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In the coming week, we expect market players to trade on a more cautious tone due to the recent plunge in oil prices from the escalating US trade tensions with its major trading partners.

Treasury Bills: The T-bills market traded on a slightly bullish note with demand mostly on the short end of the curve amid a significantly buoyant system liquidity level from OMO maturity inflows in the previous session. Yields were consequently lower by c.20bps on the day, with slight moderation also witnessed on the mid to long end of the curve.

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We expect yields to remain relatively stable opening the new week, barring a renewed OMO sale by the CBN.

Money Market: Rates in the money market moderated further by c.2pct as system liquidity remained significantly robust at N418 billion positive. The OBB and OVN rates consequently ended the session at 4.14% and 4.93% respectively.

We expect rates to remain relatively stable opening the new week, barring a significant OMO sale by the CBN.

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FX Market: At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N356.92/$ (SMIS). The NAFEX closing rate in the I&E window however increased marginally by 0.01% to N360.74/$, whilst the market turnover rose by 295% to $213m. At the parallel market, the cash and transfer rates remained unchanged at N359.00/$ and N363.00/$ respectively.

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Eurobonds: The NIGERIA Sovereigns remained significantly bearish in today’s session as threats of a US tariff on Mexico further aggravated risk off sentiments coupled with further declines in oil prices, with Brent now trading close to $62pb, down by c.3pct on the day.   The most selloff during the session was witnessed on the NIGERIA 49s which lost c.2pct in price terms as the yield curve expanded by c.16bps on the day.

In NIGERIA Corps, we witnessed slight interest in the shorter-dated tickers, with gains in ACCESS, FBNNL and ECOTRA 21s. The FIDBAN 22s were relatively stable, whilst there were better sellers on the ETINL 24s, +9bps higher on the day.


Contact us:

Dealing Desk: 01-6311667 Email: [email protected]

Disclaimer:

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Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

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Coronavirus

COVID-19: Our economy is too fragile to bear another round of lockdown – Buhari

President Buhari has called on Nigerians to do all they can to avert a second wave of COVID-19 in Nigeria.

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Q1 2020 National Debt report, Buhari finally speaks on NDDC probe, urges NA to act with a sense of urgency,National Human Rights Commission,Presidency bows to pressure, agrees to demand made by EndSARS protesters, Our economy is too fragile to bear another round of lockdown-Buhari

President Muhammadu Buhari said that the Nigerian economy is too fragile to go into another lockdown, as the second wave of coronavirus forces some European countries – Germany and France, to enter another phase of lockdown.

The President disclosed this in a social media statement on Thursday afternoon via his official Twitter handle.

Buhari said Nigeria will work hard to control its local spread, as the country can’t afford a lockdown.

Looking at the trends in other countries, we must do all we can to avert a second wave of COVID-19 in Nigeria. We must make sure that our cases, which have gone down, do not rise again. Our economy is too fragile to bear another round of lockdown,” President Buhari said.

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(READ MORE:#EndSARS: Hoodlums loot Yakubu Dogara’s house in Jos)

What you should know

According to a Bloomberg report, the rising cases of COVID-19 in Europe have led to another phase of lockdowns, with the Eurozone’s 2 biggest economies, Germany and France announcing new lockdowns restrictions.

“The measures we’ve taken have turned out to be insufficient to counter a wave that’s affecting all Europe,” said French President Emmanuel Macron

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In August, Nairametrics reported that President  Buhari approved the extension of the second phase of eased lockdown by another 4 weeks.

Nigeria’s Gross Domestic Product (GDP) in real terms declined by 6.10% (year-on-year) in Q2 2020, ending the 3-year trend of low but positive real growth rates recorded since the 2016/17 recession.

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Business News

FG to invest in the deployment of Mini-grid systems to power 5 million homes in 2021

The Minister said the government will invest in Mini-grid systems that will provide power for 5 million homes in 2021.

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Estates in Lekki increase electricity tariff to N105/kWh, Eko Electric, Ikeja and 5 others to face NERC sanction for non-compliance, CBN reveals framework for financing National Mass Metering Programme (NMMP)

In a bid to provide remote communities with clean and affordable energy, the Minister of Power, Engineer Sale Mamman has disclosed that the Government is set to invest heavily in the deployment of Mini-grid systems that will provide power for 5 million homes in 2021.

This disclosure was made by Engr. Sale Mamman in a statement released into the mainstream media via his official Twitter handle.

READ: Electricity: Nigeria now has an installed generation capacity of 13,000MW – Minister of Power

The Minister explained that it is virtually impossible for the National grid to cover every geographical point within Nigeria. He emphasized that this reality prompted the present administration to sort out alternatives, and as a result, the Government is set to invest heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, and affordable energy in 2021.

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READ: Nigeria to fix irregular power supply in 40 years- Senate

What they are saying

The Minister, in his statement, said, “It is virtually impossible to have the National grid covering every geographical point within Nigeria, that is why the Government is investing heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, affordable energy.

“In 2021, part of our priorities at the Ministry and two of its implementing agencies will be on providing these Mini-grid systems for communities and stand-alone home solar systems. We have a target of 5 million homes. Clean, affordable, and accessible energy for all.”

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(READ MORE:FG set to create at least 5 million jobs for youths in the power sector – Minister of Power)

What you should know

The Minister of Power, Engineer Sale Mamman, at the 2021 budget defense before the House of Representatives Committee on Power in Abuja, yesterday disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000MW to 13,000MW under the leadership of President Muhammadu Buhari.

READ: UPDATED: FG appoints Eweluka as NBET MD, as finance, power ministers wrestle

The Minister also pointed out that the distribution system had the capacity to evacuate 5,500MW of power, which is a significant improvement from 4,500MW in 2015.

 

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ENDSARS

Post-#EndSARS: A time of reckoning for the Insurance companies in Nigeria

As the dust from the #EndSARS protests settles down, it is a time of reckoning for insurance companies in Nigeria.

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Post-#EndSARS: A time of reckoning for the Insurance companies in Nigeria

A time of unforeseen circumstances causing huge damages to insured objects is a time to gauge the preparedness and evaluate the financial capacities of the insurers in managing the risk events vis-à-vis indemnifying for losses suffered by their clients. As the dust from the #EndSARS protests settles down, it is a time of reckoning for insurance companies in Nigeria.

The hijacked #EndSARS protests have come and gone, but the smoke raised by the trailing losses/damages are still with the insured and are quite humongous to sink the boat of the entire insurance industry put together, if not properly managed.

READ: AIICO Insurance reports an 86% increase in profit after tax for Q4 2019 

From the emerging reports, Lagos state alone requires a whopping sum of N1 trillion to resuscitate the vandalized infrastructures. The concern expressed by many stakeholders is the total costs accruable if all the vandalized infrastructures were fully insured – as the resultant claims could swallow up the insurance industry.

It is not yet clear how much of these assets were appropriately insured but considering that our insurance culture is quite low amongst both the private and public sectors, there is a strong likelihood that some of the vandalized assets might not have been appropriately insured or insured at all.

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READ: Ratings firm explains why bank non-performing loans could be worse than expected

Nairametrics recently profiled and reviewed the capital base of some frontline insurance companies in Nigeria and are persuaded to believe that they have the capacity to withstand the vagaries of the emerging losses and still stand strong, considering their excellent past claims settlement history to date.


Leadway Assurance

It is a privately-owned insurance company, whose financial capacity grew over time and can now underwrite risks of very high costs, as regards heavy industries like Oil and gas and big manufacturing concerns.

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  • It has a capital base in excess of N45 billion, according to its 2019 financial statements and a gross premium was about N89billion.
  • In 2019, it settled claims amounted to about N38.5billion.

READ: Cornerstone Insurance to issue bonus shares in view of recapitalisation


Axa Mansard Insurance

It was formerly known as Guaranty Trust Assurance Plc, following the acquisition of its majority shareholding by Guaranty Trust Bank Plc.

  • Results for the period ended 31st December 2019 reveal that the company has shareholders’ funds of N30billion and a gross premium income of about N41.6billion.
  • About N17.5billion was settled as claims within the period.

READ: Guinea Insurance Plc gives optimistic Q3 earnings forecast in spite of COVID-19


AIICO Insurance Plc

This is one of the largest Life Insurance companies in Nigeria and a primary underwriter for general insurance businesses, as well as a key player in the Oil and Gas industry.

  • As of 2019 year-end, the capital base of the company was N27.9billion, with a gross premium income of N50billion.
  • N25.4billion was settled as claims.

Explore some Advanced Financial Calculators on Nairametrics

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Custodian and Allied Insurance Plc

  • As of December 31, 2019, the company was capitalized to about N19billion, with a gross premium income of N25.2billion.
  • It settled the sum of N2.3billion as claims from clients within the period.

READ: NSE closes in the red as MPC leaves rates unchanged

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Linkage Assurance Plc

The company is a product of a merger of two major insurance companies – Central Insurance Company Limited and Linkage Assurance Plc, to form a new and bigger Linkage Assurance Plc.

  • Results for the period ended 31st December 2019 indicates that the company has shareholders’ funds of about N19billion and a gross premium income of about N6.3billion.
  • About N1.7billion was settled as claims within the period.

Bottom line

There is no doubt that the amount of damages is quite huge but the industry has the capacity to absorb the financial shock that could arise from the legitimate resultant claims connected with the hijacked #EndSARS crisis, as the frontline insurance companies are reasonably capitalized with excellent claims settlement histories.

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