Commercial banks dominated the top trades chart at the end of trading at the Nigerian Stock Exchange on Tuesday as they traded a sum of 208.9 million shares valued at N2.34 trillion.
They are FCMB, Zenith Bank, GTBank, Access Bank and Sterling Bank.
FCMB was most actively-traded stock today with 51.56 million shares valued at N82.49 million traded in 36 deals, Zenith Bank Plc followed with 43.06 million shares valued at N732.03 million in 386 deals and Guaranty Trust Bank Plc with 42.28 million shares valued at N1.08 billion traded in 274 deals.
Access Bank Plc followed with 37.24 million shares valued at N272.04 million traded in 179 deals while Sterling Bank Plc rounded off the top five most actively traded stocks with 34.8 million shares valued at N67.99 million traded in 420 deals.
Top Gainers: Red Star Express Plc earned the best performing stock today, as it gained 9.88% to close at N4.45, followed by Cornerstone for the second time this week, as it gained 9.76% to close at N0.45, while AIICO insurance Plc gained 9.52% to close the day at N0.69.
Glaxo Smithkline Consumer Nigeria Plc made the list, as it gained 8.62% to close at N6.3 while Union Diagnostic and Clinical Services Plc rounded off the list, as it gained 4.17% to close at N0.25.
Meanwhile, trading at the bourse ended on Tuesday in negative territory as the All-Share Index closed at 26,244.39 basis points, shed by 0.53% while the total market capitalisation at the end of the day stood at N25.34 trillion.
Top Losers: Chams Plc was the worst performing stock, dropped by 4.35% to close at N0.22, Nigerian Aviation Handling Company Plc (NAHCO) fell by 4.08% to close at N2.35. Lafarge Africa Plc fell by 4.01% to close at N14.35 followed by Guaranty Trust Bank Plc that fell by 2.67% to close at N25.5 while UBA rounded off the top five losers of the day. It dropped by 1.71% to close at N5.75
Naira crashes to an all-time low at the black market as liquidity crisis worsens
The volatility and uncertainty of the forex market seem to persist due to liquidity shortages across markets.
Forex turnover at the Investor and Exporters (I&E) window continued with its downward slide on Wednesday, July 1, 2020, as it dropped by 28% day on day. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.
According to the data tracked by Nairametrics, forex turnover fell from $14.37 million on Tuesday, June 30, 2020, to as low as $10.37 million on Wednesday, July 1, 2020, representing a 28% drop on a day-to-day basis. This is a second consecutive day of decline this week and also the lowest turnover recorded in the I&E window since last week.
This further reinforces the volatile and uncertain nature of the foreign exchange market with trading volumes apparently irregular and piling pressure on the exchange rate at the NAFEX market and by extension the parallel market.
The volatility and uncertainty of the forex market seem to persist due to liquidity shortages across markets. Liquidity remains quite tight in the foreign exchange market, with the average turnover in the I&E market significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.
As we have so often reported, accumulated demand for forex in the market is thought to range between $1.5 and $5 billion depending on which analyst you are speaking to. Forex shortages have persisted since the crash in oil prices coincided with the global lockdown due to COVID-19. The rise in demand and contrasting drop in supply has called for another round of devaluation, which the CBN has insisted it has plans to implement. A devaluation last occurred in March. The activities of the speculators seem to have continued unabated.
Speculators have thus patronized the parallel market, otherwise known as the black market, thereby widening the gap between it and the I&E window. The CBN maintains that the perceived demand cannot be substantiated as the lockdown induced by the COVID-19 pandemic suggest demand should be low due to travel restrictions and drop-in economic activities.
The further decline in liquidity could further fuel speculations in the black market where the exchange rate has traded at a premium of N60+ over the last few weeks. The CBN claims most of the demand being cited is not represented by any official documentation and that it has informed foreign investors with genuine forex demand to be “patient” and that they will get their forex.
In related news, the exchange rate at the I&E remained stable on Wednesday, closing at N386.50 to a dollar, which was the same rate that was recorded on Tuesday, June 30. The opening indicative rate was N387.08 to a dollar on Wednesday. This represents a loss of 2 kobo when compared to the N387.10 opening rate recorded on Tuesday.
At the black market where forex is traded unofficially, the naira depreciated further by N2 to a dollar to close at an all time low of N462 to a dollar on Wednesday, as against the N460 to a dollar on Tuesday, the lowest in almost a year. The exchange rate at the beginning of the week was N460 to a dollar. By crossing N460, the exchange rate has broken a psychological ceiling going past N460 for the first time ever.
Nigeria continues to maintain multiple exchange rates comprising the CBN official rate, the BDC rates, and the NAFEX (I&E window). Nairametrics reported last week that the government is mulling unifying the multiple exchange rates in a bid to increase the amount available for state governments to share.
The depreciation of the Naira in the black market can be attributed to the shortage of dollar supply which is outweighed by demand as that puts further pressure on the forex market. The negative impact of the coronavirus pandemic on global oil prices has constrained the CBN’s capacity to intervene satisfactorily in the foreign exchange market as dollar inflow has slumped.
The forex scarcity and drop in revenue puts pressure on the value on the naira despite CBN’s effort to maintain stability across the forex segments. The CBN is expected to continue with its intervention in the foreign exchange market to ensure market stability.
Nigerian Treasury Bills plunge to 3.39% per annum
The CBN sells T-bills on a bi-weekly basis to investors and it is one of the safest investments available.
The latest data from the Treasury bill auctions concluded recently shows that Nigeria’s 364-day tenor fell to 3.39%. On the other hand, Stop rates printed lower for the 91-day tenor at 1.789% and 182-day tenor, which went for 1.91%.
At the Treasury bill auction, the Debt Management Office sold N10 billion on the 91-day paper, N20 billion on the 182-day, and N58.857 billion on the 364-day bills.
Ladi Belo a treasury analyst at a Nigerian tier-1 bank told Nairametrics in a phone chat interview, commenting on the latest treasury bill auction. He said;
“At the NTB auction that was conducted yesterday, we witnessed significant demand, especially on the new 1-Yr bill. This is still because of the exclusion of local corporates and retail investors from investing in Omo bills. As a result, the stop rates across board closed lower than the preceding auction at 1.789%, 1.91%, and 3.39% on the short, medium, and long-tenures papers, respectively. I expect these rates to go down further in the secondary market as market players try and fill their unmet demand.”
Quick facts: The massive disparity between the subscriptions and the offers recorded suggests investors are willing to earn a negative real return, compared to the higher risk in other assets such as stocks and real estate.
Basically, the CBN sells T-bills on a bi-weekly basis to investors and it is one of the safest investments available. Interests are paid upfront, with the principal paid in full upon maturity.
Understanding Treasury Bills: Basically, when the government goes to the financial market to raise money, it can do it by issuing two types of debt instruments – treasury bills and government bonds.
Treasury bills are issued when the government needs money for a short period, while bonds are issued when it needs debt for more than, say five years. The issuance of treasury bills is also used as a mechanism to control the circulation of funds in the economy.
Treasury bills have a face value of a certain amount, which is what they are actually worth. However, they are sold for less. For example, a bill may be worth N10,000, but you would buy it for N9,600. Every bill has a specified maturity date, which is when you receive the money back.
The government then pays you the full price of the bill (in this case N10,000), giving you the opportunity to earn N400 from your investment. The amount that you earn is considered as the interest, or your payment for lending your money to the government. The difference between the value of the bill and the amount you pay for it is called the discount rate and is set as a percentage.
Tether market capitalization surges close to $10 Billion
Tether is still the only stablecoin with a market capitalization greater than $1 billion.
Just recently, the world of crypto investors and traders was caught unaware, as Tether’s market capitalization surged close to the $10 billion market capitalization.
Tether, which was trading at $1 at the time this report was drafted, has a market capitalization of $9.8 billion, according to data obtained from Coinmarketcap. It is now bigger than XRP, whose market capitalization is roughly $7.8 billion.
Why it matters: Tether continues to grow its lead on its stablecoin competitors and is still the only stablecoin with a market capitalization greater than $1 billion.
The $10 billion mark is not fundamentally significant, but it is a sign of USDT’s staying power, despite all its controversy over the years.
Quick fact: Tether is designed as a blockchain-based cryptocurrency whose digital coins in circulation are backed by the same value of traditional fiat currencies like the U.S dollar, Japanese Yen, or the Euro. It trades under the ticker symbol USDT.
Barely weeks ago, Bloomberg reports stated that the momentum with the help of the U.S dollar was expected to make Tether gain and move to the second spot.
“Absent an unlikely reversal in predominant crypto trends, it should be a matter of time until Tether passes Ethereum to take the No. 2 spot in total assets behind Bitcoin. Receiving help from widespread adoption with a workable case as a proxy for the world’s reserve currency, there seems little to stop the increasing adoption of the dollar-linked stable coin,” the report stated.