United Bank of Africa, Zenith Bank and Access Bank led the pack of banks that dominated transactions in the Treasury Bills and Federal Government bonds in half-year ended June 30, 2019.
With the low-yield environment, four leading banks generated N281 billion from investing in T-Bills and Federal Government bonds. The increase of 19.5% from N235.4 billion generated by the same four banks in the H1 2018 audited result and accounts released to the Nigerian Stock Exchange.
While UBA reported 11.1% increase on interest income investing in securities from N78.9 billion in H1 2018 to N87.7 billion in H1 2019, Access Bank Plc reported N61.14 billion interest income investing in securities, 118% increase over N28.1 billion reported in H1 2018.
Zenith Bank plc reported 11.3% increase on interest income generated from T-Bills and FGN Bonds from N77.29 billion to N85.9billion within the same period.
However, Guaranty Trust Bank Plc was the only bank with a decline on interest income generated from investing in securities to N46.5 billion, 9% below N51.1 billion reported in the preceding half-year results.
GTBank noted that earning asset yield declined by 101 basis points from 13.07% in H1 2018 to 12.06% in H1 2019 as a result of portfolio yield on T-Bills, which average 15.6% in H1 2019 as against 17.4% in H1 2018 and reduction in yield on local currency risk assets from 16.8% in H1 2018 to 16.1% in H1 2019.
Yields on fixed income securities continue to moderate in line with the apex bank’s desire for a low-interest-rate environment, with the average 91 days T-Bills dropping to 10.26% in the second quarter of 2019 from 12.39% in the first quarter of 2018.
Also, average 1-year T-bills yield dropped to 14.33% in the second quarter of 2019 from 15.76% in the second quarter of 2019.
Meanwhile, the Monetary Policy Committee of the CBN asked the managements of the banks to limit access to government securities and increase lending to the real sector.
The Governor, CBN, Mr. Godwin Emefiele, who is also the chairman of the committee, had said, “In view of the abundant opportunities that available to banks for unfettered access to government securities, which tend to crowd out private sector lending, the MPC called on management to provide a mechanism for limiting deposit money banks’ access to government securities so as to redirect banks’ lending focus to the private sector noting that this would spur the badly needed growth in the economy.”
Just In: PPPRA reduces petrol price to N121.50 per litre
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price…”
The Petroleum Products Pricing Regulatory Agency (PPPRA) has announced a new retail price band for oil marketers.
In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:
“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price with the corresponding ex-depot price for the month of June 2020, as follows; price band N121.50 – N123.50 per liter.”
Hedge funds, institutional investors rush to own stakes in Bitcoin
Hedge funds are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
With global economic uncertainty gradually becoming a daily norm, institutional and hedge funds around the world have been rushing to have a stake in crypto assets which all have been outperforming other financial assets in 2020).
Just recently, a popular hedge fund based in New York –Grayscale Investments –caught the investment world by surprise by buying up Bitcoin (BTC) at a great rate in recent months.
Lennard Neo, the head of research at Stack Funds, told Cointelegraph that institutional investors have been seeking for other options, not just to provide returns, but also to hedge their existing portfolio from downside risks. Neo said:
“Similar to Grayscale, Stack has seen an uptick in investors’ interest — almost double that figures of pre-crash in March — in Bitcoin. I would not say they are ‘gobbling up BTC’ blindly but cautiously seeking traditional structured solutions that they are familiar with before making an investment.”
In addition, Paul Cappelli, a portfolio manager at Galaxy Fund Management, explained in detail the reasons for this demand. According to him, “we’re seeing increased interest from multiple levels of investors’ wealth channels, independent RIAs, and institutions.
“The recent BTC halving came at an interesting time amid the COVID-19 outbreak and the growing unease about quantitative easing. He noted: “It clearly demonstrated BTC’s scarcity and future supply reduction as concerns deepened around unprecedented stimulus by the Fed with the CARES Act.”
Also, Michael Sonnenshein, the Managing Director of Grayscale Investments, explained briefly why his firm uses Bitcoin as an option in hedging its firm’s portfolio position.
“All three are facing issues this time around. Bitcoin has emerged as an alternative hedge, operating independently of the dramatic monetary policies enacted by central banks,” he said.
What you need to know about Hedge Funds
They are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
Measures introduced by Nigeria to ensure transparent use of the $3.4 billion IMF loan
Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.
Following the approval and disbursement of $3.4 billion Rapid Financing Instrument (RFI) to Nigeria, which is the largest COVID-19 emergency financing package so far released by the International Monetary Fund (IMF), the multilateral financial institution now expects transparent and accountable use of the funds.
The IMF’s financial assistance to Nigeria is meant to support the healthcare sector, stabilise the economy, and protect jobs and businesses that have been severely impacted by the pandemic.
The Bretton wood institution has been disbursing funds to work closely with member countries to ensure transparent and judicious use of the financial support, while making sure they are used for the intended purpose.
The IMF’s mission chief for Nigeria, Amine Mati, during a conversation, pointed out the measures to be taken by Nigeria in order to enhance transparency and governance in the use of the $3.4 billion IMF emergency financing.
According to the IMF chief, the Nigerian Government had committed to undertake an independent audit of crisis mitigation spending and related procurement processes, as well as to publish procurement plans and notices for all emergency response activities which include the names of companies that were awarded the contracts and the beneficial owners.
Mr. Mati also disclosed that special budget lines are to be created to record all crisis emergency response measures, which are published daily on Nigeria’s treasury online portal. These measures will not only ensure that financial assistance received as part of the COVID-19 response is used for its intended purposes, but will also significantly strengthen the oversight of the entire budget used for the government’s crisis response.
— IMF (@IMFNews) May 31, 2020
Implementing these measures will help to drastically reduce the governance and transparency challenges as well as corruption vulnerabilities of a country like Nigeria. Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.