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Nigeria Weekly Update: Effects of closing the Seme border

Of all recent government policies the recent closure of the border with the Republic of Benin to goods is having the most immediate effects on prices.

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Market interest, Nigeria Weekly Update: A better NPL picture

Of all recent government policies the recent closure of the border with the Republic of Benin to goods is having the most immediate effects on prices. These will undoubtedly hit consumers’ pockets and may come through in upcoming inflation data. At the same time there may be positive effects of local rice and poultry production. See page 2.

FX

During September the published FX reserves (three-month moving average) of the Central Bank of Nigeria (CBN) fell at an average of US$400.0m per week, a trend which only slowed slightly in the first week of October and which would set FX reserves to reach US$37.1bn by year-end. We do not think the CBN will tolerate this and we think that it will encourage foreign portfolio investment (FPI) into Naira fixed income securities with interest rates set perhaps as much as 450 basis points (bps) above inflation, with the potential to trend down to a spread of 350bps over inflation if FPI picks up over the coming weeks.

Bonds & T-bills

The yield on a Federal Government of Nigeria (FGN) Naira bond with 10 years to maturity fell by 6bps to 14.32%, and at 3 years fell by 64bps to 13.73% last week. The yield on a 364-day T-bill fell by 48bps to 14.30%. The yield on a T-bill with 3 months to maturity fell by 122bps to 11.80%.

[READ ALSO: Seme Border partial closure to restrict rice importation – Buhari]

There was a surplus of liquidity in the Naira fixed income markets last week where approximately N1.0 trillion (US$2.8bn) was bid for the CBN’s offer of N300bn at it’s open market operation (OMO) auction. The yield achieved in the auction was 15.40% but secondary market yields fell much lower (see above). Our sense is that the CBN will not want to see primary market rates trend below 14.50% over the coming weeks, at least until it becomes comfortable with the level of foreign portfolio investment (FPI).

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Oil

The price of Brent rose by 3.67% last week to US$60.51/bbl. The average price, year-to-date, is US$64.51/bbl, 10.01% lower than the average of US$71.69/bbl in 2018, but 17.84% higher than the US$54.75/bbl average seen in 2017.

Bonny Light and Brent crude oil, Arthur Eze, Nigeria cuts crude oil production to 1.77mbpd, Nigeria wants international oil companies to pay up now 

The International Energy Agency (IEA) has again cut its global oil demand forecast growth by 65,000 bpd to 1.0 million barrels per day (mbpd) in 2019 and by 105,000 bpd to 1.2mbpd in 2020. September’s attack on Saudi Arabia’s oil facilities dropped global oil supply in September by 1.5mbpd to 99.3mbpd, which is less than originally feared. The downtrend in demand threatens oil prices, in our view. The demand narrative also gives room for the possibility of further cuts by the Organization of the Petroleum Exporting Countries (OPEC).

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Equities

The Nigerian Stock Exchange (NSE) All-Share Index fell by 1.68% last week, pushing the year-to-date return to negative 15.58%. Last week Forte Oil (+8.11%), Mobil Nigeria (+5.64%) and CCNN (+2.70%) closed positive while Guinness Nigeria (-10.79%), PZ Cussons Nigeria (-10.00%) and Nigerian Breweries (-8.64%) fell.

[READ ALSO: Nigeria Weekly Update: A better NPL picture]

The NSE last week announced an amendment to its rules on pricing methods. The NSE has raised the number of shares that must be traded, in various classes of equity, in order to effect a change in published price. This is in addition to the 10% cap on daily price movements, all in a bid to curb price volatility.

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Hospitality & Travel

#EndSARS: NCAA denies alleged shut down of airspace, as Turkish Airlines takes off tonight

FAAN has reportedly shut down the air space of the nation due to alleged unrest in the country.

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Murtala Muhammed Airport (MMA), FAAN recruitment, FAAN in recruitment scandal as politicians takeover, Federal Airports Authority of Nigeria, 2019: Lagos airport records growth in passenger, aircraft and cargo movement  

The Nigerian Civil Aviation Authority (NCAA) has denied the alledged shut of the nation’s airspace due to the unrest, arising from the hijacked #EndSARS protests in Lagos, Abuja, and some other states in the country.

Though, the authority has not issued an official statement on the development, a source in the apex regulatory body told Nairametrics that the airspace remains open in Lagos and Abuja.

He said, “It is not true that the airspace is shut as rumoured on some social media platforms. Turkish Airline is attending to its passengers at the moment and the flight is tonight. So, where is the airspace being shut coming from.

“Delta Airline decided to divert the Lagos bound flight to Dakar, Senegal before going back to New York not because our airspace is shut but its Lagos office informed the Pilot that there is curfew in Lagos. Expectedly, American airlines are so sensitive to issues like that.”

Back story: A Twitter user, Osasu Onayiuwana, whose friend is one of Delta Air passengers en-route Lagos from Atlanta, USA, had alleged that Delta Airline returned ti New York because Nigerian air space was shut.

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He tweeted, “A friend returning to Lagos, from Atlanta on @Delta has been informed, during their Dakar, Senegal stopover, that @Nigeria’s airspace has been closed. They are now flying back to Atlanta!

“Actually, his plane is currently on the way to New York, from Dakar. Before this, some passengers asked @Delta to allow them to find their way to Lagos from Dakar. Understandably, the airline refused.”

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Economy & Politics

FRC to implement new IFRS 17

The FRC is set to implement International Financial Reporting Standard 17 (IFRS) on or before January 2023.

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The Financial Reporting Council of Nigeria is expected to implement International Financial Reporting
Standard 17 (IFRS) on or before January 2023. This follows the amendment of the standard on June 25, 2020.

This was disclosed by the Head, Directorate of Accounting Standards Public Sector, FRC, Dr. Iheanyi Anyahara, during a Stakeholders interactive forum with FRC and International Accounting Standards Board (IASB) webinar recently.

Nigeria adopted the IFRS as part of measures to improve transparency, reporting practices and full disclosures.

Having adopted the IFRS by the Council, Anyahara explained that all amendments to existing standards alongside the new standards issued by the International Accounting Standards Board (IASB) must be implemented by all reporting entities in Nigeria.

According to him, the Council is aware that implementing IFRS 17 commands a radical departure from current accounting standards and produces complex operational challenges.

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He said, “That is why we are organizing this programme and many more in collaboration with IASB to guide the users of the standards both in application and implementation.

“The Council will be organizing more events in financial reporting, auditing and corporate governance in order to sensitize the general public and lessen the knowledge gap in IFRS standards in Nigeria in collaboration with relevant agencies and organisations.”

Back story:

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Last July, Nairametrics reported when FRC released guidelines for reporting in compliance with the Nigerian Code of Corporate Governance. (NCCG 2018).

In a statement posted on its website, the Council explained that it had been engaging with all regulators of sectors for the purpose of developing sectoral guidelines of corporate governance on specific requirements relevant to each sector, which are not covered under NCCG 2018.

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Business News

Geely Auto to invest 54 million dollars in the development of healthy cars

Geely’s leading track record will be taken to a new level with the development of an all-round “healthier car.”

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As Exclusive Partner of Geely Automotive in Nigeria, Mikano brings us great news of Geely Automotive innovative steps towards development of “healthy, intelligent vehicles” by earmarking 54 million Dollars of funding to it; as a furthering of the fight against Coronavirus.

The move not only adds a new dimension to Geely’s understanding of “passenger safety,” it also represents a new development direction for automobiles.

READ: Automotive Bill: Why FG may return it to National Assembly

The development of a “healthier car” differs from specialized medical vehicles in that Geely’s products are made for ordinary consumers. Cars with comprehensive virus protection not only require the capability to isolate harmful substances in the air, it also needs to quickly and effectively purify cabin air for occupants.

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Geely Auto’s global R&D and design networks based in Europe, USA and China will jointly move to develop and research new environmentally sustainable materials with anti-bacterial and anti-viral properties which can be used within air-conditioner systems and on frequently touched surfaces such as buttons and handles.

Geely Auto will make full use of its global R&D system and resources as well as cooperate with professional medical and scientific research institutions to set up special project teams to work on the new research.

READ: Cars45 CEO explains how to increase demand for Made in Nigeria cars

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An Conghui, President of Geely Holding Group and President and CEO of Geely Auto Group said “Epidemic prevention is a job that requires the long-term effort of wider society. As the most common mode of transportation, consumers spend a considerable amount time in their cars, akin to a “second home” Only by making healthier products can we meet consumer demand for better quality of life. Based on the automotive industry’s development direction built around electrified, connectivity, intelligence, and shared mobility, auto companies should commit to developing products that help protect the health of drivers and passengers. This will become one of Geely Auto key long-term development objectives.”

Earlier on January 28, Geely Holding Group joined hands with the Li Shufu Foundation to set up a special 30 million dollars fund in support of the new coronavirus prevention and control, with a focus on the mass purchasing of much needed medical supplies for China in the short term.

Geely’s leading track record will be taken to a new level with the development of an all-round “healthier car.” Geely’s move sets a new precedent in the development of safety technologies that goes beyond developing leading crash test results and moves into new dimensions of passenger safety.

Visit www.geely.ng to find out more about Geely Nigeria

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