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Nigeria’s mutual fund asset value hits N1 Trillion

The total asset value of mutual funds in Nigeria has topped the trillion Naira mark, according to the December 13th 2019 report by the SEC. #MUTUAL FUND #ASSET #SEC

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Mutual Funds, Mutual Fund gone bad: Nigerian investor discloses his 10 years investment that nosedived , Nigeria’s mutual fund asset value reaches N1 Trillion

It is official. The total asset value of mutual funds in Nigeria has hit the trillion Naira mark, according to the recent report by the Securities and Exchange Commission. What a milestone!

In my April 2019 article on the state of the mutual fund industry in Nigeria, I projected that the asset value would hit the trillion Naira mark before the end of the year, going by observable trends as at that time. And here we are.

NAV summary report

The recently released NAV Summary Report by the Securities and Exchange Commission of Nigeria indicates that the total Net Asset Value of mutual funds in Nigeria is now N1,017,705,544,066. Who could have imagined that what started in 1991 with Paramount Equity fund as the only mutual fund in Nigeria, could balloon to an industry with over 100 funds and total asset value in trillions of Naira? A historical movement along memory lane shows that as at December 31, 1991, the total net asset value of mutual funds in Nigeria was N17.5 million in an industry of one mutual fund.

How did we get here?

Money market funds played an important and pivotal role in pushing the net asset value of mutual funds to the finish line towards the trillion Naira mark.  Nigerians love their yield or interest rate, no matter how small. It is that quest for yield and the flight to safety that made money market funds the darling of most mutual fund investors in Nigeria. On a year to date basis, the whole mutual funds in Nigeria attracted an estimated N481.6 billion in additional contributions, so far in 2019. Out of that sum, money market funds attracted N337 billion, according to analysis by Quantitative Financial Analytics. Within the year, three new money market funds were included in the SEC’s NAV Summary report. They are Legacy Money Market fund, FSDH Treasury Bill fund and GDL Money Market fund.

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Together, those 3 added about N14 billion to the money market category’s net asset value. Though investors withdrew an estimated N125 billion from mutual funds, on a year to date basis, so far, mutual funds made an estimated gain of N9.3 billion. That analysis, therefore, boils down to the fact that money markets continue to dominate the entire mutual fund industry. 69.89% of the total assets of mutual funds are invested in money market funds, while 9.78% is in Eurobond funds (those denominated in dollar), 7.7% is in fixed income or bond funds, while 4.52% is in real estate funds. It does look like Nigerian investors are yet to either understand funds like Exchange Traded funds, Ethical and Target funds because not much investments are made in those categories. The reason can as well be due to the poor performance of those fund types.

Fund ranking by asset value

Stanbic IBTC money market fund remains the largest fund in Nigeria, with 32.29% of the total asset value of the industry. The second largest is FBN Money market fund, whose asset value makes up 17.64% of Nigeria’s mutual fund asset. Stanbic IBTC Dollar fund has taken over from ARM money market fund as the third-largest mutual fund in Nigeria.

[READ MORE: Mutual Fund: Nigerian investor discloses his 10 years investment that nosedived)

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Fund manager ranking by asset value

The dynamics remain the same as Stanbic IBTC sits atop other fund managers as the fund manager with the largest asset under management, AUM. On the day that total mutual fund assets hit the trillion Naira mark, Stanbic IBTC housed 44.54% of that total. Again, FBN Capital Asset Management company retains its second position with 19.05% of Nigeria’s total mutual fund asset value. Once again, Asset and Resources Management company, ARM, is the third-largest fund manager with 8.10% of total assets of mutual funds in Nigeria, while Chapel Hill Denham Management limited took the fourth position from FSDH Asset Management company with 4.4% of mutual fund assets.

Too large to fail

If things continue the way they are, it would not be a surprise if Stanbic IBTC controlled 50% of Nigeria’s mutual fund assets. That should start to concern the regulatory authorities and they should begin to look at issues like too large to fail, in Nigeria’s mutual fund industry.

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Stanbic IBTC

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

1 Comment

1 Comment

  1. Victor

    December 21, 2019 at 5:41 pm

    Good job Uche. Please, I need a guide on how to start an investment club. Can you help?

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Economy & Politics

Nigerian government spends equivalent of 83% of revenue to service debt in 2020

The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020.

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The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020. This is according to the information contained in the budget implementation report of the government for the year ended December 2020.

According to the data seen by Nairametrics, total revenue earned in 2020 was N3.93 trillion representing a 27% drop from the target revenues of N5.365 trillion. However, debt service for the year was a sum of N3.26 trillion or 82.9% of revenue.

Nigeria’s debt service cost of N3.26 trillion has now dwarfed the N1.7 trillion spent on capital expenditure of N1.7 trillion incurred in 2020. This is also the highest debt service paid by the Federal Government since we started tracking this data in 2009.

The total public debt (External and Domestic) balance carried by Nigeria as of September 2020 stood at N32.22 trillion ($84.57 billion). Included in the total debt is a domestic debt of about N15.8 trillion.

 

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What this means: Nigeria’s debt to GDP ratio is estimated at about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.

  • However, the challenge has always been the debt service to revenue ratio, a metric that reveals whether the government is generating enough revenues to pay down its debts as they mature.
  • Since the first recession experienced in 2016, Nigeria has struggled with higher debt service to revenue ratio as revenues slid in direct correlation with the fall in oil prices.
  • Nigeria’s government spent about N2.45 trillion in debt service in 2019 out of total revenue of N4.1 trillion or 59.6% debt service to revenue ratio.
  • At 83%, 2020 ranks as the highest debt service to revenue ratio we have incurred. Before now it was 2017 with 61.6%.

Breakdown of what debts were serviced

The following amount was spent on debt service during the year

  • To service domestic debt, the government spent N1.755 trillion in 2020 as against a budget of N1.87 trillion.
  • For foreign debts, a sum of N553 billion was spent against a target budget of N805.47 billion. The drop here is likely a result of lower interest rates on foreign borrowing as well as very limited borrowing from the foreign debt market during the year.
  • The government only contributed N4.58 billion into its sinking fund instead of the budgeted N272.9 billion.
  • The sinking fund is required to set aside funds that will be used to pay down on other loans such as bonds when they mature in the future.
  • Finally, a sum of N912.57 trillion was spent on servicing CBN’s loans, granted via its Ways and Means provisions.
  • Nairametrics reported last week that a total sum of N2.8 trillion was extended by the CBN to the FG as Ways and Means.

What happens next: In 2021, the government projects a debt service of N3.1 trillion against revenue of N6.6 trillion or a debt service to revenue ratio of 46.9%.

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  • The government plans to spend N4.3 trillion on capital expenditure during the year.

 

 

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Tech News

Top 10 African tech companies and capital raised in 2020

These are the top 10 tech companies and the capital they raised in 2020.

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Startup funding in Africa, Fintech, Disrupt Africa

African startups raised over $1 billion in funding in 2020, with Nigerian startups raising 17% of this amount – 55.37million in Q1 2o2o and 28.35million in Q2 2020, according to Techpoint.

These are the top 10 rankings of the highest fundraisers for 2020.

Flutterwave

The startup provides digital payments infrastructure and services which enable global merchants, payment service providers, and pan-African banks to accept and process payments across various channels.

It raised a $35M Series-B round led by US venture capital firms Greycroft and eVentures in January 2020. The funding was invested in technology and business development to grow market share in the countries it operates in.

ChipperCash

The startup offers cross-border P2P payments services across 7 African countries. It raised $30m in a Series B funding round in November 2020 led by Ribbit Capital, an American based VC firm that invests in early-stage startups.

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The funding was used to improve its products to include API payments solutions, crypto-currency trading options, and investment services and also expand its markets.

54gene

The startup is equalizing precision medicine by including underrepresented Africans in global genomics research. It raised $15M in a Series A funding round in April 2020 led by Adjuvant Capital – a life sciences fund backed by the International Finance Corporation, Novartis, and the Bill & Melinda Gates Foundation.

These new funds will be used to address the gap that exists in precision medicine for people on the African continent.

Aella Credit

The startup is a one-stop app for all your financial needs. Aella makes it super easy for anyone to borrow, invest, and make payments. It secured a $10 million debt financing round from a Singaporean company – HQ Financial Group.

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The new capital raised from Singapore is expected to facilitate the credit company’s effort to provide financial inclusion to many more of the people who are currently unbanked across Nigeria, West Africa, and other emerging markets.

Helium Health

The startup has become the leading provider of full-service technology solutions for healthcare stakeholders in Africa. It raised a $10 million Series A round in April 2020.

Global Ventures and Africa Healthcare Master fund (AAIC) co-led the investment round. Helium plans to use the latest funding round to hire and expand to North and East Africa, including Kenya, Rwanda, Uganda, and Morocco.

Kuda Bank

The startup provides a full banking service on your smartphone. It secured a US$10 million seed round in November 2020 – the biggest seed round ever to be raised in Africa, led by Target Global with participation from Entrée Capital and SBI Investment.

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The funding will be used to help accelerate its growth plans and keep up with customer demand. Specifically, funds will be used for key hires, product development, and to expand operations across Africa.

Stanbic IBTC

Trade Depot

The startup is a Nigerian B2B eCommerce company that utilizes an end-to-end distribution platform aimed at connecting the world’s top consumer goods companies directly to retailers in Africa.

It raised $10-million in a pre-Series B equity round co-led by Partech, International Finance Corporation, Women Entrepreneurs Finance Initiative (We-Fi), and MSA Capital in July 2020.

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The new investment will enable Trade Depot to continue connecting international brands with small businesses in Nigeria, expand into other African cities, launch a suite of financial products, and credit facilities aimed at supporting its retailers.

Field Intelligence

The startup is helping governments and businesses make good on the promise of healthcare in the fastest-growing parts of the world by making the pharmaceutical supply chain radically simple, affordable, and easily accessible.

It raised a $3.6 million Series A round in March 2020, led by Blue Haven Initiative, with investors including Newtown Partners via the Imperial Venture Fund and Accion Venture Lab.

The investment will be used to scale Shelf Life expansion throughout Nigeria and Kenya, as well as the development of additional services for Shelf Life clients and their patients.

MedSaf

The startup connects suppliers to hospitals and pharmacies directly to make the pharmaceutical supply chain more efficient. The health start-up raised $3.5M in a seed funding round in December 2020.  It will use this funding to expand to other African countries.

Auto Chek

the company is an automotive technology company that aims to build solutions for the African market. It raised $3.4 million in pre-seed funding round in November 2020, co-led by TLcom Capital and 4DX with inclusion from Golden Palm Investments, Lateral Capital, Kepple Africa Ventures.

Autoochek will use the investment to grow its Nigerian and Ghanaian markets, invest in its tech, and grow its team.

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Despite the ravaging impact of Covid-19, Nigerian tech start-ups raised millions of dollars in funding. We hope to see more investors in the first quarter of 2021.

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Economy & Politics

FG receives N144 billion in dividends from NLNG in 2020

NLNG, paid the Federal Government a dividend of N188 billion in the fiscal year ended December 2020.

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LNG

Nigeria Liquified Natural Gas Company, NLNG, paid the Federal Government a dividend of N144 billion in the fiscal year ended December 2020.

This is according to the information contained in the Ministry of Finance Budget implementation report for the period of January 2020 to December 2020 and presented by the Minister for Finance Dr. Zainab Ahmed.

During the year, the Federal Government budgeted a sum of N80.3 billion as its share of dividends from NLNG, however, the actual sum received as its share was N144 billion, N63.2 billion more or 79% higher than projected.

The year 2020 was a difficult year for the government as the fall in crude oil prices and the economic shutdown that was triggered by the Covid-19 Pandemic dented projections and ravaged revenues.

READ:  NLNG says Train 7 project will surge production capacity to 30 million MPTA 

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NLNG Dividend Bliss

The dividend received from NLNG was a major bright spot in the government’s revenue performance for the year.

  • During the year, the government projected revenue of N5.36 trillion but only received N3.9 trillion in revenues representing a shortfall of N1.4 trillion or 27% for the year.
  • The huge dividend windfall received in 2020 is a stark contrast from 2017 when Nigeria just exited a recession triggered by falling oil prices and a sharp exchange rate devaluation.
  • In that year, the Federal Government’s share of dividends from Nigeria Liquefied Natural Gas (NLNG) dropped by as much as $687 million, from $1.04 billion in 2015 to $365 million in 2016, a 65% drop.
  • The N144 billion received in 2020 topped the amount received from signature bonuses only N78.2 billion and complimented the N192 billion received by VAT.
  • It is the most effective form of revenue generation for the government.

READ: NLNG signs 10 year sales deal with Eni

NLNG Controversies

Back in July Nairametrics reported that the House of Representatives planned to investigate the alleged illegal withdrawal of $1.05 billion from the NLNG account by NNPC without its knowledge and appropriation.

  • They had accused the NNPC of illegally tampering with the funds at the NLNG dividends account to the tune of 1.05 billion dollars thereby violating the nation’s appropriation law.
  • NLNG is a company jointly owned by Nigerian owned NNPC(49%), Shell (25.6%), Total (15%), and ENI (10.4%).
  • The company is located in Bonny Island and has six trains with a total capacity to process 22 million tonnes of LNG a year and as much as 5 million tonnes of natural gas liquids.
  • NLNG currently accounts for about 7% of the total LNG supply in the world. Nigeria is ranked as the 4th exporter of Natural Gas in the world.

READ: NLNG signs supply agreement with Galp Trading SA

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Upshots: The FG is targeting a revenue of N208 billion from NLNG as dividends in 2021. If this materializes, it will be a significant payout in dividend (in naira terms) competing with the N238.4 billion expected from VAT.

  • Important to note that the recent devaluation of the naira will increase the naira value of dividends and other government revenue, as it did in 2020.
  • The government also targets N6.6 trillion in revenue for the period under review.

Updated: An earlier version of this article captured the dividend as N188 billion instead of N144 billion. It has now been corrected. 

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